Position Sizing

The formula

position_size = (account_equity × risk_per_trade) / stop_distance

If you have $10,000, risk 1%, and your stop is $5 from entry on a stock, you size 20 shares (= $100 ÷ $5). On forex with pip-denominated stops the same logic applies once you convert the pip value.

Why this is the most important rule

No amount of brilliant analysis survives oversized positions. A trader using 5% risk per trade has a 33% chance of seeing five consecutive losers (the classic blowup) — at 1% risk that probability is academic.

How Finvestopia displays it

The risk panel on every Radar setup shows the dollar risk for a given account size and the implied position size. Our F-Score includes the risk headroom — a low score warns you the setup is geometrically unfavourable for your capital.

Practical defaults

• Conservative: 0.5% per trade, ≤6% open risk total.
• Standard: 1% per trade.
• Aggressive (only with edge proof): up to 2%; never higher than 3%.