How to Size a Trade: Free Position Size Cheat Sheet

The simple 3-step math for deciding how many shares to buy, plus a free 1-page printable.

Picking what to trade gets all the attention, but deciding how much to trade is where risk is actually controlled. Position sizing is just a bit of math you do before you click buy. Here is how it works, in plain English.

The one rule

Risk a small, fixed slice of your account on every trade. Many traders use 1–2%. That way, no single trade can do serious damage to your account.

The 3-step formula

Dollar risk = Account size × Risk %
Risk per share = Entry price − Stop price (use the absolute value for shorts)
Shares to buy = Dollar risk ÷ Risk per share, rounded down

A worked example

Say you have a $1,000 account and choose 2% risk. Your entry is $50.00 and your stop is $48.00.

$1,000 × 2% = $20 dollar risk
$50 − $48 = $2.00 risk per share
$20 ÷ $2 = 10 shares

That is a $500 position with $20 planned at risk. This example is hypothetical, just to show the math.

Quick checks before you buy

Stop first: is your stop set before you enter?
2:1 or better: is the potential reward at least 2× the risk? (In the example, a target of $54 or higher.)
Options: when buying options, max risk = premium × 100 × contracts. Watch for IV crush after earnings.
Crypto: count the spread and fees as part of your risk. They can be large on small coins.

Track it, or it didn’t happen

Log every trade: entry, stop, size, result and R-multiple. Over time, your own records show you what is working and what isn’t.

Want the math done for you? Our Beginner Trading Journal + Position Size Calculator (Google Sheets & Excel) sizes each trade and tracks win rate, expectancy and drawdown. Get the trading journal, $12

Disclaimer: For general education only. Not financial, investment or tax advice. Trading involves risk of loss, and you can lose more than your planned risk because prices can gap past your stop and orders can fill with slippage. Examples are hypothetical. Position sizing does not guarantee results. Do your own research.