Position sizing and risk per trade

Risk per trade is the part of your trading capital you accept losing if the stop-loss is hit. Many traders keep it to 1% or 2% of capital. The reason is arithmetic: runs of losses happen in any method, and a small risk per trade keeps a run of ten losses survivable.

1. 1Risk budget = capital × risk per trade.
2. 2Risk per unit = entry − stop-loss for a BUY (stop-loss − entry for a SELL).
3. 3Quantity = risk budget ÷ risk per unit, rounded down.
4. 4Check the position value (quantity × entry) against the money and margin in your account. If it is larger, your account limits the quantity, not your risk.

If the stop is hit, the loss is about 333 × ₹9 = ₹2,997, before costs and slippage.

Contracts that trade in lots are sized per lot: work out the risk on one lot, then divide the budget by it and round down. If one lot already risks more than your budget, the call does not fit your account at the risk you chose, and leaving it is a valid outcome.

Lot sizes are set by the exchange and revised from time to time; the Nifty 50 lot, for example, is 65 units for contracts expiring from January 2026. Check the current lot size before you size. The margin your broker blocks is separate from your risk: the loss if the stop is hit can be larger or smaller than the margin.

• Gaps: an open beyond the stop makes the loss larger than planned.
• Related trades: several open trades in one sector, or in an index and its large stocks, can lose together. Keep a limit on your total open risk as well.
• Costs: brokerage, STT, exchange charges, GST and stamp duty come on top.

• Position size calculatorThe same formula with your own figures, in shares or whole lots
• How to read a research call: work out a quantityThe same arithmetic on a sample call
• Losing streaks, drawdowns and total open risk
• Glossary: lot size