How to Calculate Position Size: The Risk-Per-Trade Formula
Most beginners decide how much to buy by gut feeling — whatever they can spare or whatever they have. Professionals do the opposite: first they decide how much they're willing to lose, and only then calculate the position size. Here's the simple formula.
The core idea
Position size isn't based on how much you want to make, but on how much you're willing to lose if you turn out to be wrong. You need three numbers for this: your deposit, the acceptable risk per trade and the distance to your stop-loss.
The formula
Position size = (Deposit × Risk per trade) ÷ Distance to stop
Risk per trade is usually 1–2% of the deposit. Distance to stop is the difference between your entry price and your stop-loss, as a percentage.
Example
Deposit: $1000. Risk per trade: 1%, i.e. $10. Entry: $100, stop-loss: $95, distance to stop: 5%.
Position size = $10 ÷ 5% = $200. If the stop is triggered, you lose exactly $10 — 1% of your deposit.
| Distance to stop | $10 risk — position | Loss if stopped out |
|---|---|---|
| 2% | $500 | $10 |
| 5% | $200 | $10 |
| 10% | $100 | $10 |
| 20% | $50 | $10 |
The key point is clear: the wider the stop, the smaller the position. The loss, meanwhile, is always the same.
Why 1–2%
Even a good system has losing streaks. At 1% risk, ten losses in a row come to roughly −10% of your deposit, after which you can carry on calmly. At 10% risk, the same streak takes more than half your account.
Common mistakes
- Confusing risk with position size. 1% risk doesn't mean "invest 1%". The position can be much larger.
- Setting the stop "by money". The stop is placed based on the chart — beyond a key level — and the position size is adjusted to fit it, not the other way around.
- Forgetting about fees and slippage. The actual loss when stopped out can be slightly larger than calculated.
- Adding leverage to "fit" the position. If the position is bigger than your deposit, the stop is too close.
On leverage and why it shouldn't change your risk, see leverage explained simply. In Aspiro Trade, every signal already includes the entry and stop-loss, so you can work out the position size with this formula in a minute.
Aspiro Trade — signals on 45 assets, each with an entry, take-profit and stop-loss included. First month free.
- Risk first, then position size.
- Risk per trade: 1–2% of your deposit.
- The stop is placed based on the chart, and the position is sized to fit the stop.
Frequently asked questions
What percentage of my deposit can I risk on one trade?
The usual advice is 1–2%. That way, even a streak of several losing trades in a row won't knock you out of the market.
Does 1% risk mean investing 1% of my deposit?
No. 1% is how much you lose if your stop-loss is triggered. The position itself can be much larger — it all depends on the distance to the stop.
What if the position comes out larger than my deposit?
That means your stop is too close. Either look for an entry with a wider stop or reduce your risk — but don't use leverage just to squeeze into the position.
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