How to calculate position size
A step-by-step method to decide how many shares to buy so that a losing trade costs only what you planned.
Why size matters more than entries
Two traders can take identical trades and end with very different results because of how much they bought. Position sizing controls how much a losing trade can hurt, which is the part of trading you can actually control.
Four steps
- Decide your risk per trade as a percentage of capital, for example 1%.
- Turn it into rupees: ₹2,00,000 × 1% = ₹2,000.
- Measure risk per share: entry ₹250, stop-loss ₹240 → ₹10.
- Divide: ₹2,000 ÷ ₹10 = 200 shares, worth ₹50,000.
Examples
| Capital | Risk | Entry | Stop | Shares | Position value |
|---|---|---|---|---|---|
| ₹1,00,000 | 1% | ₹500 | ₹480 | 50 | ₹25,000 |
| ₹1,00,000 | 1% | ₹500 | ₹490 | 100 | ₹50,000 |
| ₹5,00,000 | 0.5% | ₹1,200 | ₹1,170 | 83 | ₹99,600 |
A tighter stop allows a bigger position for the same rupee risk, but it is also more likely to be hit by normal price noise.
Position sizing in F&O
Derivatives trade in lots, so work out the number of units and round down to whole lots. If your risk allows 40 units and the lot size is 65, you cannot take even one lot within your rule. Because one lot of an index future is large, small accounts often cannot size F&O trades within a 1–2% risk limit.
Where the stop-loss comes from
The formula only works if the stop is placed for a market reason, not to make the position bigger. Common methods are a level below recent support for a long trade, a fixed multiple of the stock’s average true range (ATR), or a percentage below entry. A volatile stock with an ATR of ₹15 needs a wider stop than a quiet one with an ATR of ₹4, so for the same rupee risk you buy fewer shares of the volatile stock. That is the point: position size adjusts so that every trade risks the same amount.
Including charges in the risk
If the stop is hit, you lose the price distance plus round-trip charges. For 200 shares bought at ₹250 and stopped at ₹240 intraday at Zerodha, charges are about ₹52, so the real loss is about ₹2,052 rather than ₹2,000. For tight intraday stops, charges can be a noticeable share of the risk; reduce the quantity slightly or include charges in the stop distance.
Common mistakes
- Sizing by how much money is available rather than by risk.
- Ignoring charges and slippage, which make the real loss bigger.
- Raising risk after a loss to "win it back".
- Holding several positions that move together, which multiplies the real risk.
Use the position size calculator for the numbers, and check costs with the brokerage calculator.
Frequently asked questions
What is the formula for position size?
Position size = (capital × risk %) ÷ (entry − stop-loss). With ₹2 lakh, 1% risk and a ₹10 stop distance, that is 200 shares.
How much should I risk per trade?
Many traders risk 0.5% to 2% of capital per trade. Lower risk makes long losing streaks survivable.
Does position sizing work for intraday?
Yes. The method is the same; intraday stops are usually tighter, which allows larger quantities, but leverage limits and charges must be considered.
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Written and maintained by Mantu Kumar
Mantu builds TradeProfy’s calculators and checks every statutory rate against exchange circulars, broker rate cards and the Finance Act. He is not a SEBI-registered adviser, so TradeProfy explains costs and maths but never tells you what to trade.
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