Position size and risk per trade: the arithmetic
Risk control is mostly arithmetic. This page shows the calculation. It is education, not advice about what to trade.
The idea
Decide first how much money you can afford to lose on one trade, for example 1% of your capital. Then work out how many units that allows given where your stop price is.
A worked example
Capital 100,000 and risk 1% means 1,000 at risk. If you enter at 100 and your stop is at 98, each unit risks 2. So 1,000 ÷ 2 = 500 units, a position worth 50,000.
Limits
Prices can jump past a stop, so real losses can be larger than planned. Fees also matter. Treat the result as a ceiling, not a target.
In Super B.A.: The Risk Calculator in the Trader door does exactly this arithmetic on your numbers. Open the app
Related guides
- Why a trading journal helps and what to record
- Paper trading: practise with virtual money
- How to read a candlestick chart
General information for learning. It is not financial, tax, legal or investment advice.