Why Position Sizing Matters
Most beginners make the same mistake: they buy a fixed number of shares without thinking about how much they're risking. A good position size calculator helps you answer one simple question — how many shares should I buy so that if my stop loss hits, I only lose what I'm comfortable losing?
The 1-2% Rule
Professional traders typically risk no more than 1-2% of their account on any single trade. If you have a $10,000 account and risk 2%, you're willing to lose $200 on this trade. The position size calculator tells you exactly how many shares that translates to based on your entry and stop loss prices.
Example
You have a $10,000 account. You want to buy a stock at $50 with a stop loss at $45. You're risking 2% ($200) on this trade.
The risk per share is $5 ($50 - $45). So you can buy 40 shares ($200 ÷ $5). Your total position value is $2,000 (20% of your account).
If the stock hits your stop loss, you lose exactly $200 — right in line with your risk plan.