Position Size Formula
A position size formula calculates an appropriate position size from the amount a trader intends to risk and the distance between entry and stop. A simplified percentage based version is: Position Size ≈ Amount at Risk ÷ Stop Distance % The exact calculation depends on the instrument and contract structure.
Why it matters to you
Suppose a trader wants to risk: $100 and the stop is: 2% from entry A simplified calculation gives: $100 ÷ 0.02 = $5,000 position If the stop were 5% away instead: $100 ÷ 0.05 = $2,000 position Same intended account risk. Different position size.
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