Module 4 — Risk & position sizing
Position sizing maths
7 minute read
In plain English
Shares = risk amount ÷ (entry price − stop price). The stop distance determines the size, not your enthusiasm.
Why it matters
It is the single calculation that most separates traders who last from those who do not.
Example
Risking $20 with an entry at $3.00 and a stop at $2.80 gives $0.20 of risk per share — 100 shares.
Try this
Recalculate your last five paper trades using this formula and compare with what you actually did.
Common mistake
Picking a round number of shares first and finding a stop afterwards.
What this does not mean
Correct sizing does not improve your odds. It controls your damage.
Educational content only. Not financial advice.