ConceptUpdated 2026-10-19
Position sizing: size comes from the stop
You don't pick how many shares to buy. You pick how much you're willing to lose and where your stop is; the share count falls out of the math.
Most new traders pick a share count, or a dollar amount, and then think about a stop. That's backwards.
The order of operations
- Decide the risk for the trade. This is 1R in dollars, kept to a small fixed slice of the account.
- Find the stop: the price where the idea is wrong (see the stop).
- Divide: shares = risk ÷ (entry − stop).
A tight stop allows more shares. A wide stop forces fewer. Either way the loss at the stop is the same 1R.
Why it matters
Sizing from the stop is what makes results comparable in R. It also keeps one bad trade from doing real damage. A string of −1R losses hurts, but no single one ends the game.
On this site
Sizes are shown as a percent of the position. "Trimmed 54%" means about half the shares were sold. You'll never see share counts, because the lesson is in the structure, not the number.
Related
- Deep value: buying quality near the 200-week VWMAA quality company sells off to its 200-week volume-weighted average. Scale in at pre-set levels, then manage it like a pullback once the trend turns.
- Gap risk: when the stop doesn't save youIf a stock opens below your stop, the stop fills at the open, not at your price. Holding overnight always carries this risk, and the record shows it.
- Plan before the fillEvery new buy has a setup, a one-line trigger, a stop, a size worked out from that stop, and a first target with a trim amount, all written down before the order fills.
- R: measuring every trade by its riskR is the amount you planned to lose if the stop hit. Every result on this site is a multiple of it, so a trade reads the same at any account size.
- Risk firstDecide what you can lose, and where you're wrong, before thinking about what you can make.
- The stop: deciding where you're wrongA stop is the price that proves the trade idea wrong. It's chosen before entry, placed as a live order, and only ever moved in your favor.