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Beginners' CornerLerato D.Mentor1d ago Pinned
Education

Position sizing 101: the one formula every trader should know

Most blown accounts come from position sizes that are too large, not bad ideas.

The formula
Position size = (Account × Risk %) ÷ (Entry − Stop)

Example (R20,000 account, 1% risk)

  • Risk amount = R200
  • Entry R100, stop R95 → R5 risk per share
  • Position size = R200 ÷ R5 = 40 shares

Decide your stop first, then let the formula set the size — never the other way round. Many traders use 0.5–2% risk per trade; pick what lets you sleep and survive a losing streak.

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3 comments
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3 comments

  1. Nadia P.1d ago

    This finally clicked for me. I was buying a fixed number of shares every time!

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    1. Lerato D.Mentor1d ago

      Very common! Your risk changes every trade that way. Glad it helped.

      29
  2. Marco R.Pro trader20h ago

    Add a max-exposure cap per asset class too, so correlated positions don't stack risk.

    25