The short answer
Position sizing turns a cash-risk budget and an entry-to-stop distance into units. Add a cost allowance, round down to the permitted increment, and check whether the resulting exposure is affordable.
- Calculate risk amount from an account and percentage.
- Convert entry-to-stop distance into units.
- Spot when a minimum order size changes the plan.
The core formula
First calculate the cash amount you are willing to risk. Then calculate the loss per unit if the invalidation is reached. Divide the first number by the second. If fees, spread or conversion affect the product, reserve room for them rather than pretending the arithmetic is exact.
The calculator on this site uses the same simple model for learning. Real contracts can have point values, minimum sizes, tick values or different settlement rules, so verify the instrument specification.
A worked example
Imagine an account of 2,000 and a planned risk of 0.5%. The cash risk is 10. If an entry is 50 and the stop is 48, the distance is 2 per unit. The simple size is 5 units because 10 divided by 2 equals 5.
If the venue requires a minimum of 10 units, the theoretical size cannot be used as-is. You could reduce the planned risk, choose a different instrument or skip the trade. A minimum size is a constraint, not a reason to ignore the risk plan.
Cash risk and affordability are separate checks
Risk budgeting answers how much the price-distance loss would be at an assumed exit. Affordability answers whether you can fund the position. A tighter stop may produce more units without making that exposure affordable. Use the calculator for a cost-adjusted case.
| Input or result | Example |
|---|---|
| Account balance | $2,000 |
| Risk budget at 1% | $20 |
| Entry / stop | $100 / $98 |
| Units before costs | 20 ÷ 2 = 10 |
| Notional exposure | 10 × 100 = $1,000 |
Separate size from notional value
Ten units at an entry of $100 have $1,000 of notional exposure. With a stop at $95, the simplified planned loss is $50 before costs. Neither figure is the margin a particular broker might require.
Change the stop to $90 while keeping the $50 risk budget: the simple size becomes five units. The step-by-step stop-loss guide explains this calculation; the calculator lets you check other inputs.
The same risk, different stop
With 100 of cash risk, a 2-unit stop distance gives a 50-unit position. A 5-unit stop distance gives a 20-unit position. The wider stop does not automatically mean more risk when the size is adjusted.
Choose the next useful step
- How to calculate position size from a stop loss
Calculate position size from a planned cash loss and stop distance, with long and short examples, rounding and fees explained.
- Crypto position size calculator
Calculate crypto position size from account balance, risk percentage, entry and stop price, with an optional cost buffer and clear exposure checks.
- Stop loss vs stop limit: trigger, price and fill risk
Compare stop-loss and stop-limit orders with a gap example, trigger-price checklist and clear explanations of execution and non-fill risk.
Carry these four ideas forward.
- Calculate cash risk first.
- Use absolute entry-to-stop distance.
- Check unit and contract rules.
- Round down when the product requires increments.
Three questions before the next tab.
Choose the answer that best matches the lesson. This is a memory check, not a market signal.
Continue with original sources.
These links provide definitions and current context. Product rules, regulation and network details can change, so verify time-sensitive information at the source.
Before you move on
Does position sizing guarantee the planned loss?+
No. Execution gaps, slippage, fees and product mechanics can change the result. It is a planning estimate.
Should I size from the take-profit target?+
The size should primarily reflect the risk at invalidation. A target can help evaluate the trade, but it should not hide an oversized position.
Can I use this for forex?+
The simple calculator is educational. Forex sizing needs pip value, lot conventions and account-currency conversion, which is why the pip calculator is separate.