Position Sizing Calculator

Tutorial: Method 1: Total Account Risk Percentage Calculator

Managing risk is essential for successful trading, and the Position Sizing Calculator is a powerful tool that helps you do just that. This tutorial will guide you through how to use it effectively to manage your trades, helping you calculate how much to buy or short while keeping your risk in check.

Step 1: Enter Your Account Value

What: Input the total value of your trading account in dollars. This number represents the amount of capital you have available for trading. The account value is used to calculate your maximum risk for each trade.

Example: If you have $10,000 in your trading account, enter 10000.

Step 2: Set Total Account Risk %

What: Decide what percentage of your total account you are willing to risk on a single trade. Typically, traders risk 1% to 2% of their account per trade. This helps to limit potential losses and ensures that one bad trade won’t significantly impact your overall account.

Example: If you’re comfortable risking 1% of your account per trade, enter 1 in the "Total Account Risk %" field.

Tip: Use the preset buttons (e.g., 0.5%, 1%) for quick selection. Clicking these will automatically update the field.

Step 3: Specify Entry and Stop-Loss Prices

What: Enter the price at which you plan to enter the trade and the price at which you will exit if the trade goes against you. The Stop Loss helps cap your loss and is vital for proper risk management.

Example: If you plan to buy at $50 and set a stop loss at $45, enter 50 for entry and 45 for stop loss.

Note: The calculator will also determine if the position is long or short based on the relationship between the entry price and stop loss.

Step 4: Specify Max Positions (Optional)

What: If you want to control how many positions you hold at the same time, you can enter a number in the "Max Positions" field. This helps allocate your account value across multiple positions, evenly dividing your total account size by the number of positions specified, ensuring you don’t overexpose yourself to any one trade.

Note: Position allocation will never exceed the specified risk.

Example: If you want to hold up to 10 positions simultaneously, type 10 into the "Max Positions" field.

Continuing our example: With an account value of $10,000, an Entry Price of $50, a Stop Loss of $45, and 10 max positions, your position allotment will be $1,000 per position. The risk per share is $5 ($50 - $45), and you are risking 1% of your total account value ($100). The calculator will determine that you can buy up to 20 shares for this trade ($100 risk / $5 risk per share), without exceeding your risk limits or position allotment.

Step 5: Input the Ticker Symbol (Optional)

What: Enter the symbol of the stock or asset you’re trading (e.g., AAPL, NVDA). This field is for reference and does not affect calculations.

Example: Enter AAPL if you are trading Apple stock.

Step 6: Click "Calculate" or "Clear"

What: Once all required fields are filled, click the Calculate button to compute the results. If you wish to reset the fields, click the Clear button to remove all values.

Understanding the Results

Once you have entered all required values and clicked the Calculate button, the calculator will display various important results:

• Position Type: The calculator will indicate if your position is a Long Position (buying and expecting prices to rise) or a Short Position (selling and expecting prices to drop), based on the relationship between your entry price and stop loss.
• Max Shares: This is the maximum number of shares you can buy, considering both your account risk and your stop loss. In our example, with a risk per share of $5 and a $100 risk amount, the calculator would allow you to buy 20 shares.
• Position Size: The total dollar amount you will spend on the position, calculated as Max Shares times Entry Price. In our example, 20 shares at $50 each results in a position size of $1,000.
• Risk per Share: The difference between your Entry Price and Stop Loss. In our example, this is $5.
• Trade Risk: The percentage of risk relative to your entry price, calculated as (Risk per Share / Entry Price) * 100. In our example, this is 10%.
• Dollars Risked: The dollar amount of your account you are risking on this trade, calculated based on the Risk Percentage of your total account value. In our example, $100 is being risked.
• 1R, 2R, 3R Targets: These are potential profit targets at multiples of your risk. For a Long Position (buying expecting prices to rise), 1R would be your entry price plus the risk per share, 2R would be double the risk per share added to the entry price, and 3R would be triple. For a Short Position (selling expecting prices to drop), these targets are calculated by subtracting the risk multiples from your entry price.
• Max Positions: The maximum number of positions specified, which helps determine how much of your account is allocated per trade. In our example, this is 10.
• Position Allotment: The dollar value allocated for each position if Max Positions is specified. In our example, $1,000 is allocated per position.

Note: If we set Max Positions to 8, the Position Allotment would change accordingly. With an account value of $10,000 and 8 max positions, the total account is divided into 8 parts, resulting in an allotment of $1,250 per position. However, it would not exceed our Position Size of $1,000 since 1% is our total risk exposure.

Tutorial: Method 2: Dollar Calculator

The Dollar Risk Calculator helps you manage your trades by calculating the appropriate position size based on the dollar amount you are willing to risk on a single trade. This tutorial will walk you through how to effectively use it to determine how many shares to buy or short while keeping your risks under control.

Step 1: Input Your Dollar Risk

What: Enter the maximum dollar amount you are willing to risk on a single trade. This represents the amount of money you are comfortable losing if the trade goes against you.

Example: If you are willing to risk $100 on this trade, type 100 into the "Dollar Risk" field.

Step 2: Specify Entry Price and Stop Loss

What: Enter the Entry Price and Stop Loss for the trade.

The Entry Price is the price at which you plan to enter the trade, while the Stop Loss is the price at which you will exit the trade if it moves against you. This is crucial for calculating the Risk per Share and determining how many shares you can afford to buy while staying within your dollar risk limit.

Example: If you plan to buy a stock at $100 and will exit if it drops to $90, enter 100 for Entry Price and 90 for Stop Loss.

Note: The calculator will also determine if the position is a Long Position (buying expecting prices to rise) or a Short Position (selling expecting prices to drop) based on the relationship between the Entry Price and Stop Loss.

Step 3 (Optional): Enter Account Value

What: Enter your total account value if you wish to see how the position size relates to your total account value. This helps in understanding the impact of each trade on your overall portfolio.

Example: If your account size is $10,000, type 10,000 into the "Account Value" field.

Explanation: For instance, if your Position Size comes out to $1,000, and your total Account Value is $10,000, then 10% of your account is being used for this position.

Step 4 (Optional): Enter Ticker Symbol

What: The Ticker Symbol is optional and used for your own reference. It allows you to keep track of which asset you are trading but does not affect the calculations.

Example: If you are trading Apple stock, enter AAPL.

Step 5: Click "Calculate" or "Clear"

What: Click the Calculate button to see the results of your inputs. If you want to start over, click the Clear button to reset all fields.

Understanding the Results

Once you have clicked the Calculate button, the Dollar Risk Calculator will display several key results:

• Position Type: The calculator will indicate whether your position is a Long Position (expecting prices to rise) or a Short Position (expecting prices to drop) based on the relationship between your Entry Price and Stop Loss.
• Max Shares: The maximum number of shares you can buy based on your dollar risk and risk per share. For example, if your dollar risk is $100 and the difference between Entry Price and Stop Loss (Risk per Share) is $10, the calculator will determine that you can buy 10 shares ($100 / $10).
• Position Size: The total dollar amount you will spend on the position, which is calculated as Max Shares times Entry Price. For instance, if you can buy 10 shares at $100 each, your Position Size would be $1,000.
• Risk per Share: This is calculated as the absolute difference between your Entry Price and Stop Loss. In our example, this is $10 ($100 - $90).
• Dollars Risked: The total dollar amount you are risking on this trade, which is the value you entered initially as Dollar Risk (e.g., $100).
• Position Size as % of Account: (if Account Value is provided): This value shows what percentage of your account is being allocated to this position. For example, if your account size is $10,000 and your Position Size is $1,000, the calculator will show that this position represents 10% of your total account. This helps you understand how much of your total portfolio is at risk for each trade, allowing for better risk management across multiple positions.

Tips for Best Use

• Set Realistic Dollar Risk: Determine a dollar risk amount that aligns with your overall risk management plan. A common rule of thumb is to risk no more than 1-2% of your total account on a single trade.
• Use Logical Stop Loss Levels: Place your stop loss at a level that makes sense for the trade while considering market volatility. This helps you avoid being stopped out due to normal price fluctuations.
• Track Your Positions: Use the Ticker Symbol field to keep records of your trades and track results over time. This helps maintain discipline and provides valuable data for evaluating your strategy.

Final Thoughts

The Dollar Risk Calculator is a powerful tool for managing risk by focusing on the specific dollar amount you are willing to lose. By defining your risk, you make trading more systematic and prevent emotional decision-making.

If you have questions about using the Dollar Risk Calculator or need help understanding any part of the results, feel free to ask!

Tutorial: Method 3: Position Sizing Calculator Based on Position Percentage

The Position Percentage Calculator helps you determine the number of shares to buy or short by calculating the maximum shares based on the percentage of your account value or allocated amount that you are willing to allocate towards the trade.

Step 1: Enter Account Value or Allocation Amount

What: Input your Account Value or the amount of capital you wish to allocate to this particular trade. This value will be used as the basis for calculating how much risk you are taking with each position.

Example: If you have a total account size of $10,000, enter 10,000 into the "Account Value" field. Alternatively, if you only want to allocate $5,000 of your account to this trade, you can enter 5,000.

Step 2: Set Your Position Allocation %

What: Decide the percentage of your total account value (or allocated amount) that you want to allocate towards this trade. This percentage determines how much of your total capital will be used for the specific position.

Example: If you want to allocate 10% of your account towards this trade, enter 10 in the "Position Allocation %" field or adjust the slider accordingly.

You can also use the preset buttons (e.g., 5%, 10%, 25%) to quickly set your allocation percentage.

Step 3: Specify Entry Price and Stop Loss

What: Enter the Entry Price and Stop Loss for the trade.

The Entry Price is the price at which you plan to enter the trade, and the Stop Loss is the price at which you will exit if the trade goes against you. The difference between these two prices represents your Risk per Share.

Example: If you plan to enter at $100 and exit if the price drops to $90, enter 100 for the Entry Price and 90 for the Stop Loss.

Note: The calculator will also determine if the position is a Long Position (buying expecting prices to rise) or a Short Position (selling expecting prices to drop) based on the relationship between the Entry Price and Stop Loss.

Step 4 (Optional): Enter Ticker Symbol

What: The Ticker Symbol is for reference purposes and does not affect the calculations. It helps you keep track of your trades.

Example: Enter AAPL if you are trading Apple stock.

Step 5: Click "Calculate" or "Clear"

What: Click the Calculate button to compute the results based on the inputs. If you want to reset the form, click the Clear button to erase all inputs.

Understanding the Results

Once you click the Calculate button, the Position Percentage Calculator will display the following key results:

• Max Shares: The maximum number of shares you can buy, calculated based on the percentage of your account or allocated amount that you are willing to allocate to the trade, as well as the Risk per Share. For example, if your account value is $10,000, you decide to allocate 10% ($1,000), and your Risk per Share is $10 (from Entry Price minus Stop Loss), the calculator will determine that you can buy 100 shares ($1,000 / $10).
• Position Size: The total dollar amount you will allocate towards the position, calculated as Max Shares times Entry Price. For example, if you can buy 100 shares at $100 each, your Position Size is $10,000.
• Risk per Share: This is the difference between your Entry Price and Stop Loss. In our example, this is $10 ($100 - $90).
• Trade Risk %: The percentage of risk per share relative to your entry price, calculated as (Risk per Share / Entry Price) * 100. For example, if your Risk per Share is $10 and your Entry Price is $100, your Trade Risk % would be 10%.
• Dollars Risked: The dollar value at risk on this trade, calculated based on the account value and the risk percentage you specified. In our example, if the account value is $10,000 and you set a 1% risk, then Dollars Risked will be $100.
• Position Type: Indicates whether your position is a Long Position (expecting prices to rise) or a Short Position (expecting prices to drop), depending on the relationship between your Entry Price and Stop Loss.

Tips for Best Use

• Set Realistic Risk Percentages: A common approach is to risk 1-2% of your account on any given trade. This prevents you from overexposing yourself to any single trade and helps manage risk consistently.
• Use Appropriate Stop Loss Levels: Setting your stop loss too close to the entry price may result in being stopped out due to regular market fluctuations, while setting it too far may expose you to more risk than intended.
• Consider Maximum Positions for Diversification: Using the Max Positions field helps you diversify your trades, ensuring you do not allocate too much of your account to a single position.

Final Thoughts

The Position Percentage Calculator is a versatile tool that helps traders allocate their capital based on risk percentage, ensuring a consistent risk management strategy. By defining your position size through a fixed risk percentage, you make your trading decisions more systematic and less driven by emotions.

If you have any questions about using the Position Percentage Calculator or need help interpreting the results, feel free to ask!