Position Size Calculator
Position sizing is the one risk control that works regardless of whether you are right about anything else.
The formula
The logic runs backwards from the loss you are prepared to accept. You decide the maximum you will lose, you decide where the idea is proven wrong, and the position size falls out of those two numbers. It is never chosen first.
The consequence is that a tighter stop permits a larger position and a wider stop demands a smaller one, for identical risk. This is the opposite of how most people size positions, which is by how confident they feel.
Choosing a risk percentage
Professional traders typically risk 0.5–2 % of capital per position. The reason is survival arithmetic: losses compound against you faster than gains compound for you.
| Drawdown | Gain needed to recover |
|---|---|
| 10 % | 11 % |
| 25 % | 33 % |
| 50 % | 100 % |
| 75 % | 300 % |
| 90 % | 900 % |
At 1 % risk per position, ten consecutive losses cost about 10 % of the portfolio — recoverable. At 10 % risk, the same ten losses cost 65 %, requiring a 186 % gain to get back. Since losing streaks are a normal feature of any strategy, the size of the bet determines whether you are still trading when the strategy works.
Why this matters more in crypto
Three features of crypto markets make position sizing unusually important:
- Gaps and wicks. Thin order books mean prices can move through a stop before it fills. Your realised loss can exceed the planned one, so leave margin.
- 24/7 trading. A position can be destroyed while you sleep. Stops must be actually placed, not mental.
- Leverage and liquidation. Exchanges liquidate positions automatically, and cascades can move price violently against you in minutes. A liquidation price is not a stop — it is a total loss of the position's margin.
Correlation is the hidden risk. Ten separate crypto positions sized at 1 % each are not 1 % risk ten times. Crypto assets are heavily correlated and in a broad sell-off they fall together, so the real portfolio risk is far closer to 10 % than to 1. Size the aggregate exposure, not just each trade.
Frequently asked questions
What if the calculated position is bigger than my portfolio?
It means the stop is very close to the entry relative to your risk tolerance, and reaching it would require leverage. That is a signal to widen the stop and accept a smaller position, not to borrow.
Where should I place a stop?
At the price that would tell you the reason for the trade was wrong — below a structural support level, or outside normal volatility for the asset. Placing it at a round percentage because it feels tolerable is how you get stopped out by noise.
What reward-to-risk ratio should I look for?
Many traders require at least 2:1, meaning the target is twice the stop distance. Combined with the win rate your approach actually achieves, that determines whether the strategy has positive expectancy. At 2:1 you only need to be right about a third of the time.