This article is part of our comprehensive trading course, Master the Art of Trading, designed to guide you step-by-step through market mastery.
Ever had a perfect trade setup, but still ended up with a big loss?
You followed your strategy, waited for the right entry, and even set a clear —just like we discussed in our previous article on Stop Loss and Target Setting. But here’s the truth:
Without proper position sizing, even the best trades can fail.
Position sizing is the key to managing your risk, protecting your capital, and growing your account steadily.
What is Position Sizing?
Position sizing is the process of deciding how many shares/lots/units to trade based on your account size and the amount of risk you’re willing to take.
It tells you how big or how small your trade should be.
Why Position Sizing is Crucial for Traders
- Helps you avoid overtrading or undertrading
- Keeps losses consistent and under control
- Allows you to stay in the game long-term
- Ensures you don’t blow up your account on a few bad trades
You can’t control market outcomes, but you can control your risk on every trade — and position sizing is how you do it.
The Simple Formula
Here’s a beginner-friendly way to calculate your position size:
Position Size = Risk Per Trade / Stop Loss per Share
Example:
- Total Trading Capital: ₹1,00,000
- Risk per trade: 1% (i.e., ₹1,000)
- Stop Loss: ₹10 per share (You can learn more about setting this in our Stop Loss and Target Setting guide)
- → Position Size = 1,000 / 10 = 100 shares
So you should buy/sell 100 shares in this trade.
This ensures that even if the trade hits Stop Loss, your loss is capped at ₹1,000 — just 1% of your capital.
Use Our Free Calculator
Instead of calculating manually, you can use our Free Position Size Calculator. Just enter your Capital, Risk %, and Stop Loss — and it will instantly give you the correct quantity to trade.
👉 Try the Position Sizing Calculator Now
Expert Tips for Effective Position Sizing
- Risk only 1–2% of your capital per trade.
- Avoid increasing position size just because you feel “more confident.”
- Never trade without knowing your exact quantity and risk.
- Use the calculator before every trade — make it a habit.
Final Words: Mastering Your Trades
Great trades aren’t just about entries and exits — they’re about managing risk.
Position sizing bridges the gap between a good strategy and long-term consistency. It’s a vital component of any robust trading plan.
Ready to take your trading discipline to the next level? Start using the calculator and apply proper position sizing in every single trade.
Next Up:
In the next article, we’ll dive into Risk-Reward Ratios — how to find trades that offer the best potential return for the risk you’re taking.