How many shares should you buy?

How to calculate position size in Indian stocks

Position size is how many shares you buy. The reliable way to decide it is to start from the rupees you are willing to lose if your stop-loss is hit, not from how much capital you have or how strongly you feel about the trade.

The formula

Quantity = floor(risk in ₹ ÷ (entry − stop))

• Risk in ₹ is your risk per trade: a fixed percentage of your capital.
• Entry − stop is the risk per share.
• floor means round down to a whole share. Rounding down guarantees the trade never risks more than you chose.

For a short trade the stop is above the entry, so the risk per share is stop − entry:

Quantity = floor(risk in ₹ ÷ (stop − entry))

Then check the capital used: quantity × entry. That is the money the position ties up (on a short, the margin your broker asks for instead).

Worked example: long

Capital ₹5,00,000, risk 1% per trade.

• Risk in ₹ = 1% × ₹5,00,000 = ₹5,000
• Entry ₹500, stop ₹480, risk per share = ₹20
• Quantity = floor(₹5,000 ÷ ₹20) = 250 shares
• Capital used = 250 × ₹500 = ₹1,25,000 (25% of capital)
• Loss if the stop is hit = 250 × ₹20 = ₹5,000

Try these numbers in the Position Size Calculator.

Worked example: short

Same capital and risk. Entry ₹300, stop ₹315.

• Risk per share = ₹315 − ₹300 = ₹15
• Quantity = floor(₹5,000 ÷ ₹15) = floor(333.33) = 333 shares
• Loss if the stop is hit = 333 × ₹15 = ₹4,995
• Position value = 333 × ₹300 = ₹99,900

Try the short example.

Why the stop decides the size

Two trades with very different stops should risk the same rupees. A tight stop allows more shares; a wide stop allows fewer.

Every row loses ₹5,000 at its stop. Place the stop where the chart says your idea is wrong — below a swing low, or a multiple of ATR away — then let the size follow. Never move the stop closer just to buy more shares.

When capital, not risk, is the limit

A very tight stop can ask for more money than you have. With entry ₹500 and stop ₹495, risk per share is ₹5, so ₹5,000 risk gives 1,000 shares — ₹5,00,000, your entire capital in one position. In that case cap the position at the most capital you will put into one stock, and accept that it risks less than ₹5,000.

The opposite happens too. With a ₹5,000 risk budget, a stop ₹6,000 below the entry gives a quantity of zero: the account is too small for that trade at that risk.

The 1% and 2% rules

The 1% rule keeps the loss on any one trade to 1% of capital; the 2% rule allows 2%. At 2% the example above becomes ₹10,000 risk and 500 shares, using ₹2,50,000.

Neither is magic. The lower figure means a long losing streak — which every strategy has — costs less: ten losses in a row at 1% leave you about 9.6% down, at 2% about 18.3% down. The Drawdown Recovery Calculator shows how much harder the deeper hole is to climb out of. Many traders start at 1% or below until their own win rate and reward-to-risk are proven.

Before you place it

• Gaps: a gap can open past your stop, so a real loss can exceed the plan. Slippage adds a little more.
• Charges: STT, stamp duty and the rest come on top; see the Trading Charges Calculator.
• The whole book: one well-sized trade can still push your total open risk too high. Check it in the Risk Planner.

Educational content only. It is not investment advice and not a recommendation to buy or sell any security. Prices in examples and illustrations are made up. Patterns and rules fail often; past behaviour guarantees nothing.