Investment Risk & Position Size Calculator
Determine optimal position size and potential loss before entering a trade.
Risk Analysis Results
Understanding Investment Risk
Investment risk refers to the possibility of losing some or all of the original investment. Unlike a guaranteed savings account, market investments fluctuate in value. Understanding and quantifying this risk is the first step toward building a resilient portfolio.
The Importance of Position Sizing
Position sizing is the practice of determining how many units of an asset to buy or sell based on your account size and risk tolerance. A common rule among professional traders is the "1% rule," which suggests never risking more than 1% of your total capital on a single trade. This calculator helps you apply this rule by calculating the exact number of shares or units you should purchase to stay within your risk limit.
How to Use This Calculator
To use this tool effectively, input your total account capital and the percentage you are willing to lose on this specific trade (Risk Tolerance). Then, enter your planned Entry Price and your Stop Loss Price. The calculator will determine the maximum position size that ensures you do not lose more than your specified risk amount if the stop loss is triggered.
Risk/Reward Ratio
If you provide a Target Price, the calculator will also determine your Risk/Reward Ratio. This metric compares the potential profit of the trade to the potential loss. Generally, a ratio of 1:2 or higher (risking 1 to make 2) is considered favorable for long-term profitability.