How this number is made
Position size starts from the dollars you are willing to lose, not from how many shares you can afford. The loss per share is the entry minus the stop. Shares are the risk budget divided by that gap.
- One percent of the account is a common risk budget. It is still a choice.
- The stop has to be a price where you will actually exit. A stop you ignore does not limit the loss.
Formula
Shares = (account × risk percent) ÷ (entry − stop). The stop must be below the entry for a long trade.
Worked example
With the figures already in the form, shares is 125.00.
Questions
Does this include slippage?
No. If you expect the fill to be worse than the stop, widen the gap yourself.
What about a short?
This page is a long position: the stop is below the entry. A short risks the opposite direction.