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The formula
- Risk budget
- Capital × Risk %
- Risk per share
- Entry price − Stop-loss (for a short: Stop-loss − Entry)
- Quantity
- Risk budget ÷ Risk per share, rounded down
Notice what the formula leaves out: how sure you feel about the trade. The stop-loss sets the risk per share, the rule sets the rupees, and the quantity simply follows from the two.
A worked example
Capital ₹2,00,000, risk 1% per trade, entry ₹840, stop-loss ₹820. The prices are made up.
- Risk budget: ₹2,00,000 × 1% = ₹2,000
- Risk per share: ₹840 − ₹820 = ₹20
- Quantity: ₹2,000 ÷ ₹20 = 100 shares
- Position value: 100 × ₹840 = ₹84,000 (42% of capital). If the stop is hit, the loss is ₹2,000.
Same trade with the stop at ₹800 instead: risk per share becomes ₹40, so the quantity falls to 50 shares — and the loss at the stop is still ₹2,000.
Try the position size calculator
Enter your capital, risk %, entry and stop-loss — the same math as the guide above.
Buy
100 shares
- Loss if stop is hit
- ₹2,000.00 (1% of capital)
- Position value
- ₹84,000.00
- Capital used
- 42%
- Stop distance
- ₹20.00 (2.38%)
This calculator only does arithmetic on the numbers you enter. It uses no market data and is not investment advice or a recommendation to trade.
Why the stop-loss comes first
A common mistake is to pick the quantity first — “I will buy 200 shares” — and then put the stop wherever the loss feels bearable. That stop sits at a price that means nothing for the trade idea. Place the stop where the idea is proven wrong, then let the quantity follow. A wider stop just means fewer shares for the same rupee risk.
What a losing streak does at 1%, 2% and 5%
Every method has losing streaks. When each trade risks a fixed share of the capital you have left, this is how far capital falls after a run of full stop-outs, and the gain then needed just to get back:
| Losses in a row | At 1% risk | At 2% risk | At 5% risk |
|---|---|---|---|
| 5 | −4.9%needs +5.2% | −9.6%needs +10.6% | −22.6%needs +29.2% |
| 10 | −9.6%needs +10.6% | −18.3%needs +22.4% | −40.1%needs +67% |
| 20 | −18.2%needs +22.3% | −33.2%needs +49.8% | −64.2%needs +179% |
Ten losses in a row cost about 9.6% at 1% risk and need about 10.6% to recover. At 2% the same streak costs 18.3%; at 5% it costs 40.1% and needs 67%. Small, fixed risk is what keeps a bad run survivable.
When the real loss is bigger than 1%
- Gaps: if a stock opens below your stop, a stop-loss order fills at the next available price, not at your stop.
- Slippage: in a fast market the fill can be a few ticks worse than the trigger.
- Charges: brokerage, STT, exchange fees, GST and stamp duty are paid on top of the price move.
This is why StockMyWealth sizes from a stop 0.5% (or 3 ticks, whichever is larger) beyond yours, so a small gap stays inside the budget. A large gap can still go past it; no stop-loss can promise a maximum loss.
1% or 2%?
Both are widely used. 1% is gentler on losing streaks; 2% lets a smaller account take positions of a useful size. What matters more than the exact number is applying it to every trade — including the one you feel certain about. In StockMyWealth you choose 1% or 2% per trade and the quantity is calculated from your capital.
Educational content. Examples use made-up prices, not any real security, and nothing here is investment advice or a recommendation to trade. Risk disclosure.