Position size calculator

Shares from the dollars at risk

Start with the loss you would accept if the trade fails, in dollars: account times risk percent. At $25,000 and 1%, that is $250. Next, measure the distance from entry to stop, $4 on a $62 entry with a $58 stop, and divide. 250 / 4 is 62.5, which rounds down to 62 shares, since rounding up would push the loss at the stop past the limit. The stop decides the size. A stop on a 2 stock is a move of about 6.5% against you, which some stocks cover in a single session. Move it to $60 and the same $250 buys 125 shares. The lesson on turning a risk percentage into dollars and shares goes step by step, and placing a stop where the trade idea is wrong covers where that stop belongs.

Reward to risk and the gap line

A target turns the trade into a ratio. At $70, the reward is $8 a share against $4 of risk, or 2.0R, and a run of 2.0R trades breaks even before costs if one in three of them wins. The reward-to-risk ratio explains how to set the target honestly. The gap line prices the case a stop cannot protect. A stop order becomes a market order once it triggers, so a stock that opens $2 below a $58 stop fills near $56, and on 62 shares the planned $248 loss becomes $372.

Where the size meets the account

Tight stops produce big share counts. Risk 1% of $25,000 with a $0.50 stop and the formula asks for 500 shares of a $62 stock, $31,000 of exposure, more than the account holds, so the trade would need margin, and the calculator flags it. Commissions and the spread are left out; add them to the stop distance where they are large. The formula also can't see your other open trades, and five positions each risking 1% can all hit their stops in the same bad session, which is why adding up the risk on all your open trades belongs next to it. Liking the idea is no reason to size up, as conviction makes a terrible position size argues.