About Position Sizing
What is position sizing in trading?
Position sizing is the process of determining how many shares, contracts, or units to buy or sell on a single trade. Correct position sizing ensures you never risk more than a defined percentage of your account on any one trade — typically 1-2%.
What percentage of my account should I risk per trade?
Professional traders typically risk 0.5% to 2% of their total account per trade. Beginners should start at 0.5-1%. Risking more than 2% per trade significantly increases the probability of account blowup even with a good win rate.
What is the R multiple?
The R multiple represents the reward-to-risk ratio of a trade. If you risk $100 (1R) and your target is $200, the trade is a 2R setup. Most professional traders only take trades with a minimum 2:1 reward-to-risk ratio.
How does stop-loss distance affect position size?
The wider your stop-loss, the smaller your position size must be to keep risk constant. If you risk 1% of a $10,000 account ($100) and your stop-loss is 5% away from entry, you can only buy $2,000 worth of the asset. If the stop is 2% away, you can buy $5,000 worth.
Can I use this calculator for crypto?
Yes. Position sizing principles apply to all markets: stocks, crypto, forex, and commodities. Simply enter the current price of the crypto asset and your stop-loss price.