Position Sizing — the Skill That Beats Stock Picking
7/6/2026
risk-management
guide
Position size = (account x risk percent) divided by (entry minus stop). That one formula converts fear into arithmetic.
Level by level
Beginner
Example: 100,000 account, 1 percent risk (1,000), stop 5 away → 200 shares. The stop distance decides the size, not your confidence.
Intermediate
Wider stops → smaller size; tighter stops → bigger size — SAME money risk. That's how volatile and calm stocks become equal citizens.
Advanced
Fixed-fractional sizing compounds smoothly; Kelly-optimal sizing maximises growth but doubles pain — half-Kelly is the practitioners' compromise (calculator in Tools).
Common mistakes
- Sizing by number of shares I can afford instead of risk
- Doubling size after wins (streak euphoria)
Practise & tools
_Educational content only — not financial advice. Historical behaviour never guarantees future results._
Keep learning — free tools