Question 1

How do I calculate position size?

Accepted Answer

Position size = (Account size × Risk %) ÷ (Entry price − Stop-loss price). Example: $25,000 account, 2% risk ($500), buying at $10 with a stop at $9.50 = $500 ÷ $0.50 = 1,000 shares. This formula guarantees you only lose your planned amount if stopped out.

Question 2

Should I use the same position size for every trade?

Accepted Answer

Same dollar risk, not same share count. If you risk $500 per trade, the number of shares changes based on how far your stop-loss is from entry. A tight stop means more shares; a wide stop means fewer shares. The dollar at risk stays constant.

Question 3

What is position sizing for penny stocks?

Accepted Answer

The same formula applies, but penny stock volatility means stops are often wider (percentage-wise). A $0.50 stock might need a $0.10 stop (20%), giving you fewer shares than you'd expect. Never size up because the stock is 'cheap' — that's how accounts blow up on OTC names.

What Is Position Sizing? How to Size Every Trade Correctly

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