What is Position Sizing?

Position sizing refers to determining how much capital or how many units of an asset should be involved in a particular trade. It is an important part of risk management because the position size directly influences the potential profit and loss.

As per general market understanding, the amount to trade can be determined based on several factors, such as:

• Available capital
• Acceptable loss
• Entry price, and 
• Stop-loss level.

For example, suppose a trader has ₹1 lakh and decides that the maximum acceptable loss on a trade is ₹2,000. Now, the position size can be calculated based on the distance between the entry price and stop-loss price. 

By following such an approach, a trade size can be linked to a predefined level of risk (rather than only allocating a fixed amount of capital to every trade).

Want to Calculate Position Size?

Trade246 offers a free position size calculator forex. It can be used unlimited times without the need for any registration or login. Use it today to estimate the appropriate “forex position size”, calculated based on inputs such as:

• Account balance
• Risk percentage or amount
• Currency pair
• Entry price, and 
• Stop-loss level.

Besides, you can also use our several other “pre-trade planning calculators” to estimate your potential trading costs, returns, or capital requirements.