Beginner · Guide · 3 min read
Risk and position sizing basics
A simple fixed-risk method for deciding how much to buy on every trade.
Position sizing means deciding how much to buy so that one losing trade does not hurt your account badly.
A simple fixed-risk method
- Decide the amount you are willing to risk on one trade, usually a small percentage of your trading capital.
- Decide your stop-loss price before you enter.
- Subtract the stop-loss from your entry price to get the risk per share.
- Divide your risk amount by the risk per share to get the quantity.
Example (illustration only)
If you risk ₹1,000 on a trade, enter at ₹100 and place the stop-loss at ₹95, the risk per share is ₹5. The quantity is 1,000 ÷ 5 = 200 shares.
Why it matters
Losses are a normal part of trading. Keeping each loss small gives you room to keep following your plan. Sizing by risk, not by how confident you feel, is one of the habits that separates a process from a gamble.
This guide is educational and is not investment advice.
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