Educational only. Not investment advice. Past signals don't predict future results.
Position sizing from a stop loss is just math once the stop is set. Decide how many dollars you're willing to lose if the stop is hit, divide that by the distance from entry to stop, and round down. That's how many shares or coins you buy. The stop decides where you're wrong. The size decides how much being wrong costs.
Most people do it backwards. They pick a size that feels right, like 100 shares or $1,000 of a coin, and then squeeze the stop until the possible loss looks small. That's how a stop ends up sitting inside normal daily noise. Last week's article covered where to put the stop. This one picks up right after that.
The formula
Size = dollar risk ÷ (entry − stop)
For a short, use stop − entry. You only need the distance.
- Dollar risk is what you'll lose if price hits the stop and you get out there. Many traders use a small slice of the account, like 1%. On a $10,000 account that's $100.
- Stop distance is the gap between entry and stop, in price.
- Round down. If the math says 3.9 shares, buy 3. Rounding up quietly raises your risk.
That's it. Same dollar risk every time, different size every time.
See free daily signals
Open the crypto tape to study today's setups with entry and stop marked on the chart — educational context, not instructions.
Three setups from the record
These are closed signals from my published record, each worked with the same $100 of risk. The levels are exactly as they're listed there.
JPM, short, listed Nov 7, 2026: wide stop
| Entry | 334.49 |
|---|---|
| Original stop | 359.80 |
| Stop distance | 25.31, about 7.6% |
| Size for $100 risk | 100 ÷ 25.31 = 3.95, so 3 shares |
| Position value | about $1,003 |
| Risk if stopped at 359.80 | about $76 |
A wide stop on an expensive stock means a small position. Three shares feels like nothing, but it's the right number for that stop. The trade closed at 342.08, a loss of about $23 on 3 shares.
BAC, short, listed Nov 9, 2026: tight stop
| Entry | 49.66 |
|---|---|
| Original stop | 50.47 |
| Stop distance | 0.81, about 1.6% |
| Size for $100 risk | 100 ÷ 0.81 = 123.5, so 123 shares |
| Position value | about $6,108 |
| Risk if stopped at 50.47 | about $100 |
Same $100 risk, but the position is worth about six times as much as the JPM one ($6,108 vs. $1,003), because the stop is so close. The exit came at 50.55, a little past the stop, so the loss was about $109 instead of $100. The record shows it as -1.10R.
LTC-USD, long, listed Nov 5, 2026: the stop got skipped
| Entry | 56.27 |
|---|---|
| Original stop | 53.48 |
| Stop distance | 2.79, about 5% |
| Size for $100 risk | 100 ÷ 2.79 = 35.84 LTC |
| Position value | about $2,017 |
| Exit | 51.64 |
| Actual loss | about $166 |
Crypto lets you buy fractions, so there's less rounding. But this one shows the gap between planned risk and actual risk. Price closed well past the stop, and the exit landed at 51.64. The loss was about 1.66 times the plan, -1.66R on the record.
Why the loss can be bigger than your stop
The formula assumes you get out at the stop price. You often won't.
- Gaps. A stock can open past your stop on news, below it on a long or above it on a short. Your order fills at the open, not at your level.
- Close-based exits. Some daily rules exit on the daily close, not the moment price touches the stop. Price can run well past the stop before the candle closes.
- Fast crypto moves. A coin can drop through the stop in minutes, and thin books mean worse fills.
If you trade rules or markets where this happens a lot, size a bit smaller than the formula says. Using 70% to 80% of your normal dollar risk leaves room for slippage. On the LTC trade, sizing for $70 instead of $100 would have kept the actual loss near $116.
Common sizing mistakes
Moving the stop to fit the size. If the size you want needs a tighter stop, the size is wrong, not the stop.
Forgetting the position value. A tight stop can produce a position bigger than your account. If the math says buy $25,000 of a stock and you have $10,000, the stop is too tight for that account or the trade isn't for you.
Using different dollar risk on every trade. Risking $50 on one trade and $300 on the next because you "feel good" about it makes your results depend on your mood, not your rules.
Rounding up. Three tenths of a share isn't worth the extra risk.
A quick checklist
- Set the stop at the level that proves the trade wrong.
- Pick your dollar risk before you look at the size.
- Divide dollar risk by stop distance.
- Round down.
- Check the position value against your account.
- Shave the size if gaps or close-based exits are common in that market.
FAQ
How do I calculate position size from a stop-loss?
Divide the dollar amount you're willing to lose by the distance between your entry and your stop. With $100 of risk and a stop $2 away, you'd buy 50 shares.
How much should I risk per trade?
There's no single number. Many traders keep it to a small slice of the account, often around 1%, so a string of losses doesn't do serious damage.
Does a wider stop mean more risk?
Not if you size from it. A wider stop means a smaller position, so the dollar risk stays the same.
Why did I lose more than I planned?
The exit filled past your stop. Gaps, fast moves, and rules that exit on the daily close all cause it. Size a little smaller to leave room.
Does this work for crypto and stocks?
Yes. The math is the same. Crypto lets you buy fractions, so you can match your dollar risk more closely.
Try it on a live setup
Every setup on alktrading.com shows the entry and the stop. Open one, pick your dollar risk, and work out the size before you look at anything else.
Learn the method live
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Educational only. Not investment advice. Past signals don't predict future results.