Position sizing answers a specific question: how many units fit within a planned loss budget? It is different from deciding how much money to put into a trade. A large position with a close stop and a small position with a wide stop can have similar planned risk, but different exposure.
Start with the loss budget
Multiply account equity by your chosen risk percentage. For an illustrative ₹1,00,000 account and 1% risk, the budget is ₹1,000. This percentage is an example, not a recommended risk level. Your ability to absorb losses, other open positions and execution conditions matter.
Risk budget = account equity × risk percentage ÷ 100
Quantity before rounding = (risk budget − estimated total charges) ÷ absolute entry-to-stop distance
Work through one trade
Suppose a long entry is ₹500 and the stop is ₹490. The price risk is ₹10 per share. With no charges, a ₹1,000 budget allows 100 shares. If you reserve ₹100 for combined charges, the quantity becomes 90 shares: ₹900 price risk plus ₹100 costs.
That 90-share position requires ₹45,000 of cash at the entry price without leverage. If only ₹30,000 is available, the cash limit reduces it to 60 shares. If an instrument trades in fixed lots, round down to a permitted whole lot rather than rounding up beyond the risk limit.
Use the calculator
- Enter the account balance and chosen risk budget.
- Select long or short and enter a stop on the appropriate side of entry.
- Include estimated charges, lot size and buying power.
- Check both the calculated quantity and capital required before using the result.
A stop is not a guaranteed exit
Price gaps, low liquidity and slippage can make the actual loss exceed the model. A short trade reverses the stop direction, but still uses the absolute price distance. Derivative contracts may also require tick values or multipliers: do not enter a quoted price as though every contract were one share.
Several correlated positions can lose together. A per-trade budget does not measure total portfolio risk. Recalculate when your balance, entry, stop or expected fees change, rather than reusing an old quantity.
Further reading
CME Group: proper position size explains the relationship between stop placement, account risk and position size.
More guides
- Indian Trading Charges Explained
- Trading Compounding with Withdrawals
- Risk Reward Ratio and Break-Even Win Rate
- Why Trading Losses Need Larger Recovery Gains
Educational examples only, not personalized investment or tax advice. See our disclaimer and editorial standards. Report a correction.