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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
The dollar amount or number of shares/contracts in a single trade.
Why It Matters
Your position size determines your risk. A $1,000 option position in a $50,000 account is 2% - reasonable. The same $1,000 in a $5,000 account is 20% - dangerous. Position size should be calculated BEFORE you enter a trade based on where your stop loss would be.
Key Points
- Calculate: Position Size = (Account Risk %) × (Account Size) ÷ (Risk per Share)
- Start small when learning - you can always add to winners
- Winning traders think in risk units, not dollar amounts
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Common Questions
The dollar amount or number of shares/contracts in a single trade. Your position size determines your risk. A $1,000 option position in a $50,000 account is 2% - reasonable.
Your position size determines your risk. A $1,000 option position in a $50,000 account is 2% - reasonable. The same $1,000 in a $5,000 account is 20% - dangerous. Position size should be calculated BEFORE you enter a trade based on where your stop loss would be.
Calculate: Position Size = (Account Risk %) × (Account Size) ÷ (Risk per Share)
Start small when learning - you can always add to winners
Winning traders think in risk units, not dollar amounts