Position Sizing · WealthJot.ai

⚖️ Position Sizing

Calculate optimal position size using Kelly Criterion and fixed risk

Position Sizing: shares to buy is 400, based on the entered inputs.

400

400 shares to buy — 2.4× your money

Total Trading Capital₹10,00,000

Risk Per Trade1%

Entry Price₹500

Stop Loss Price₹475

Target Price₹560

Historical Win Rate55%

Position Value

₹2,00,000

Max Risk (₹)

₹10,000

Potential Gain

₹24,000

Risk:Reward Ratio

2.4×

Kelly % (full)

36.3%

Half-Kelly % (recommended)

18.1%

Expected Value per Trade

₹8,700

Save this calculation — sign up free to keep it and track it against your real plan.

Formula

Position Size (quantity) = (Capital × Risk %) ÷ (Entry Price − Stop-Loss Price)

Worked example

Input	Value
Total Trading Capital	₹10,00,000
Risk Per Trade	1%
Entry Price	₹500
Stop Loss Price	₹475
Target Price	₹560
Historical Win Rate	55%
Shares to Buy	400
Position Value	₹2,00,000
Max Risk (₹)	₹10,000
Potential Gain	₹24,000
Risk:Reward Ratio	2.4×
Kelly % (full)	36.3%
Half-Kelly % (recommended)	18.1%
Expected Value per Trade	₹8,700

Why sizing decides survival

Position sizing answers the only question you fully control: how much do I risk on this trade? The fixed-risk method caps each trade’s loss at a set share of capital (1-2% is the professional norm): position size = (capital × risk%) ÷ (entry − stop). The Kelly criterion goes further, sizing by your statistical edge — and the calculator runs both.

Fixed risk: shares = (capital × risk%) ÷ (entry − stop) · Kelly: f = W − (1−W)/R

W = win rate, R = average win ÷ average loss. Kelly gives the growth-optimal fraction of capital — in practice traders use half-Kelly or less.

Example₹10 lakh capital, 1% risk (₹10,000), entry ₹500, stop ₹480: size = 10,000 ÷ 20 = 500 shares (₹2.5 lakh position). The position is 25% of capital but the risk is 1% — the stop, not the position value, defines exposure. Ten consecutive losses — a bad but survivable streak — costs ~10% of capital instead of ruin.

The deeper math is the asymmetry of drawdowns: lose 20% and you need +25% to recover; lose 50% and you need +100%. Risking 1-2% per trade isn’t timidity — it’s what keeps the recovery arithmetic winnable through the losing streaks every strategy eventually has. And full Kelly, though growth-optimal on paper, assumes you know your true win rate and produces stomach-churning swings — which is why practitioners halve it.

Common mistakeSizing by conviction (“I’m sure about this one — go big”). Your certainty is not an input the market prices; a 60%-edge trade still loses 40% of the time, and one oversized loss undoes fifty disciplined wins. The system’s edge lives in the aggregate of many uniformly-sized bets, never in any single one.

✓ You learnedSize from the stop: (capital × 1-2%) ÷ per-share risk. Kelly tells you the theoretical ceiling — trade at half of it or less. Position sizing won’t create an edge, but it’s the only thing that guarantees your edge survives long enough to pay.

FAQs

Is 2% risk per trade too much or too little?

For most retail traders 1% is the safer default: at 1%, a 10-loss streak costs ~9.6% of capital; at 2%, ~18%; at 5%, ~40% — deep enough to break both the account and the discipline. Go below 1% while a strategy is unproven; earn the right to 2% with a live track record, not backtests.