Position Sizing risk management Calculator Money Management

Position Sizing Calculator — How to Size Trades in Indian Markets

Learn the exact formula to calculate position size for equity, futures, and options trades on NSE. Includes worked examples in ₹, common mistakes, and a free position sizing method.

ArthaLearn

24 March 202610 min read

Risk more than 2% per trade and you're gambling, not trading

Position sizing is the single most important skill that separates profitable traders from gamblers.

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If someone asked you what the most important trading skill is, you would probably say "picking the right stock" or "timing the entry." You would be wrong.

The single most important skill in trading is position sizing — deciding how much to risk on each trade. You can have a 60% win rate with brilliant entries and still blow your account if you risk 10% on every trade. Conversely, you can have a mediocre 40% win rate and be consistently profitable if you size correctly with a good risk-reward ratio.

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The 1-2% rule: never risk more than 1-2% of your total trading capital on a single trade. This is not optional. This is survival.

Why Position Sizing Matters More Than Entry

Consider two traders, both starting with ₹5,00,000.

Trader A has a great strategy with 55% win rate and 1:2 R:R. But he risks 8% per trade because "conviction is high."

Trader B has the same strategy. But she risks 1.5% per trade, every single time, no exceptions.

After a normal 5-trade losing streak (which happens to every strategy eventually):

Trader A has lost ₹2,00,000 — a 40% drawdown. He needs an 67% gain just to break even. His confidence is shattered. He starts revenge trading.

Trader B has lost ₹37,500 — a 7.5% drawdown. She needs an 8.1% gain to recover. Her process is intact. She continues trading calmly.

Same strategy. Same losing streak. Radically different outcomes. That is the power of position sizing.

The Position Sizing Formula

The formula is simple. Memorize it:

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Position Size (Shares) = (Account Size × Risk %) ÷ Stop Loss Distance (per share)

Let's break it down:

Account Size = Your total trading capital (not including long-term investments)

Risk % = The maximum percentage you're willing to lose on this trade (1-2% recommended)

Stop Loss Distance = The difference between your entry price and your stop loss price

Worked Examples for Indian Markets

Example 1 — Equity Delivery (Reliance Industries)

Account: ₹5,00,000 | Risk: 1% | Entry: ₹2,800 | SL: ₹2,740

Max risk amount = ₹5,00,000 × 1% = ₹5,000

SL distance = ₹2,800 - ₹2,740 = ₹60 per share

Position size = ₹5,000 ÷ ₹60 = 83 shares

Capital required = 83 × ₹2,800 = ₹2,32,400 (46% of account — acceptable for delivery)

If the trade hits your stop loss, you lose exactly ₹5,000 — 1% of your account. No more.

Example 2 — Equity Intraday (TCS)

Account: ₹3,00,000 | Risk: 1% | Entry: ₹4,100 | SL: ₹4,070

Max risk amount = ₹3,00,000 × 1% = ₹3,000

SL distance = ₹4,100 - ₹4,070 = ₹30 per share

Position size = ₹3,000 ÷ ₹30 = 100 shares

With intraday margin of 5×, you only need ~₹82,000 in margin for 100 shares of TCS. The risk is still capped at ₹3,000.

Example 3 — Nifty Futures

Account: ₹10,00,000 | Risk: 1.5% | Entry: 23,500 | SL: 23,430 | Lot size: 25

Max risk amount = ₹10,00,000 × 1.5% = ₹15,000

SL distance per unit = 23,500 - 23,430 = 70 points

Risk per lot = 70 × 25 = ₹1,750 per lot

Number of lots = ₹15,000 ÷ ₹1,750 = 8.5 → round down to 8 lots

Always round down, never up. If the math says 8.5 lots, you trade 8.

Example 4 — Bank Nifty Options (Buying)

Account: ₹2,00,000 | Risk: 2% | Option premium: ₹350 | SL: ₹250 | Lot size: 15

Max risk amount = ₹2,00,000 × 2% = ₹4,000

SL distance per unit = ₹350 - ₹250 = ₹100

Risk per lot = ₹100 × 15 = ₹1,500 per lot

Number of lots = ₹4,000 ÷ ₹1,500 = 2.67 → 2 lots

Many options traders skip this step and "just buy 5 lots." That is gambling. With 2 lots and a ₹100 SL, your max loss is ₹3,000 — 1.5% of your account. Manageable.

The Kelly Criterion — An Advanced Approach

The Kelly Criterion is a mathematical formula that calculates the optimal fraction of your capital to risk based on your win rate and R:R ratio.

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Kelly % = Win Rate - (Loss Rate ÷ R:R Ratio) Example: 55% win rate, 1:2 R:R → Kelly % = 0.55 - (0.45 ÷ 2) = 0.55 - 0.225 = 32.5%

The full Kelly is too aggressive for real trading. Most professionals use Half Kelly (divide by 2) or Quarter Kelly for safety. In the example above, Half Kelly would be 16.25% — still aggressive. The 1-2% rule is essentially a very conservative Kelly fraction, which is why it works so well for retail traders.

You need at least 100+ trades of data before Kelly becomes reliable. Until then, stick with the 1-2% rule.

5 Common Position Sizing Mistakes

1. Trading Full Margin

"My broker gives me 5× margin, so I use all of it." This is the fastest way to blow up. Margin amplifies both gains and losses. Use the position sizing formula — your risk should be based on account size and SL, not on available margin.

2. Same Size Every Trade

Buying "100 shares of everything" regardless of price or volatility means you're risking ₹200 on one trade and ₹5,000 on another. The formula adjusts size to the trade's risk profile.

3. Increasing Size After Wins

A 5-trade winning streak does not mean your next trade is more likely to win. Increasing size after wins (without recalculating from your new account size) leads to giving back all profits in one bad trade.

4. Widening Stop Loss to Reduce "Size"

If the formula says you can only buy 50 shares but you want 100, do NOT widen your stop loss to make the math work. The SL should be based on technical levels, not on how many shares you want to buy.

5. Ignoring Correlated Positions

If you have three open positions in banking stocks (HDFC Bank, ICICI Bank, SBI), you effectively have one large banking bet. Your total sector risk should also stay within bounds.

Tracking Your Position Sizing with ArthaLearn

ArthaLearn's trading journal automatically calculates your risk-per-trade and flags violations of your sizing rules. Here is what you get:

Risk % per trade — Calculated from your entry, SL, and account size. See at a glance if you're staying under 2%.

Position size suggestions — Enter your planned entry and SL, and the portfolio tracker shows the correct quantity.

Drawdown alerts — If your account drops below a threshold, the system suggests reducing risk % automatically.

Over-sizing warnings — Flagged in your daily review if any trade exceeded your risk limit.

The goal is to make correct position sizing automatic — so you never have to rely on willpower in the heat of the moment.

The Bottom Line

Position sizing is not glamorous. Nobody posts their position sizing calculations on Twitter. But it is, without exaggeration, the difference between traders who survive and traders who don't.

Memorize the formula: (Account × Risk%) ÷ SL Distance = Position Size. Apply it to every single trade. No exceptions for "high conviction" plays. No exceptions for tips from Telegram channels. No exceptions, period.

Start tracking your risk per trade today with ArthaLearn's journal, or learn more about managing your trading risk with our guides on stop loss strategies and drawdown management.