Calculate how many shares to buy based on your risk tolerance
This is your total trading capital. For example, if you have $10,000 in your trading account, enter 10000.
Many professional traders risk 1-2% per trade. This means if you have a $10,000 account and risk 1%, you're willing to lose $100 on this trade.
The current price of the stock you want to buy. For example, if AAPL is trading at $150.00, enter 150.
How far below your entry price will you exit if the trade goes against you? For example, if you buy at $150 and want to exit at $145, your stop distance is $5.
Scenario: You have a $10,000 account and want to buy a stock trading at $150. You'll set your stop loss at $145 (a $5 risk per share).
This demonstrates how position sizing limits losses to a predetermined amount. For educational purposes only.
Position sizing is widely considered a critical component of trading. Here's a comparison:
Trader A risks 10% per trade. After 3 losses in a row, they're down 30%. They need a 43% gain just to break even. Recovery becomes challenging.
Trader B risks 1% per trade. After 3 losses in a row, they're down 3%. They need a 3.1% gain to break even. Recovery is more manageable.
Educational Note: Historical trading data suggests that proper position sizing can significantly impact long-term results, regardless of win rate.
MarketDly provides daily trading signals with position sizing calculated for your account size.