How to calculate position size in trading: formula and examples

How many coins should you buy so that, if your stop is hit, you lose exactly the amount you decided in advance? Here is the formula with clear examples.

1. Why position size matters

Most beginners choose the trade amount by feel: buy $100 worth, half the account, or "whatever I don't mind losing". As a result, one trade may cost 1% of the account and the next one 20%. Results start to depend on luck rather than on the quality of decisions.

The professional approach works the other way round: first you decide how much you are willing to lose if the idea fails, then you place the stop-loss where the idea breaks, and only then do you calculate the size. That way every trade, even a losing one, costs a known amount.

2. The formula

For ordinary instruments (spot, linear USDT futures) there is one formula:

Traders usually risk 0.25–1% of the account per trade. It is not a law, but this level lets you survive a losing streak without a deep drawdown: 10 stops in a row at 1% is about −10%, at 5% it is already about −40%.

3. Example: buying on spot

• Account: 2,000 USDT, risk per trade: 0.5% → money risk = 2,000 × 0.005 = 10 USDT.
• Entry: 100 USDT per coin, stop-loss: 96 USDT → risk per coin = 100 − 96 = 4 USDT.
• Position size = 10 ÷ 4 = 2.5 coins, i.e. a purchase worth 2.5 × 100 = 250 USDT.

If price reaches the stop, you lose 2.5 × 4 = 10 USDT — exactly the planned 0.5% of the account. Note that the trade used 250 USDT, but you only risk 10. Trade amount and risk are different things.

The further the stop, the smaller the size for the same risk. That is normal: a wide stop means fewer coins, a tight stop means more.

4. Example: futures with leverage

• Account: 1,000 USDT, risk: 1% → 10 USDT.
• Long BTC: entry 60,000, stop 58,800 — 2% from the entry price.
• Position value = 10 ÷ 0.02 = 500 USDT (≈ 0.0083 BTC).
• With 5× leverage the exchange locks collateral (margin) = 500 ÷ 5 = 100 USDT.

5. Fees and slippage

The formula gives risk "before costs". Fees are charged on entry and exit: with a 0.05% taker fee on a 500 USDT position that is about 0.25 + 0.25 = 0.5 USDT — 5% of your risk. In a sharp move the stop may fill at a worse price (slippage). So with very tight stops and frequent trading, costs noticeably eat into results — keep a small buffer and reduce the size slightly.

6. Common mistakes

• Calculating risk from the trade amount. "I bought 500 worth, I risk 1%" — no: risk is calculated from the account and the distance to the stop.
• Placing the stop for convenience. The stop belongs where the trade idea is invalidated, not where the size looks right.
• Rounding the size up. If the minimum lot gives more risk than allowed, reduce the size, choose another instrument or skip the trade.
• Moving the stop as price approaches it: that is how 1% risk quietly turns into 5%.
• Forgetting about several positions. Three 1% trades on related coins (BTC, ETH and an altcoin) often fall together — effectively 3% total risk.

7. Calculator

To skip the manual math, use our free position calculator: enter your account size, risk, entry price and stop — it calculates the number of coins, trade amount, margin with leverage, fees and the reward-to-risk ratio.

More on risk management, daily limits and losing streaks — in course module 11, "Risk and capital management".

This material is educational and is not investment advice. Trading, especially with leverage, carries a risk of losing capital.