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Position sizing and the 1% rule: how many shares should you buy?

Updated 6 November 2026 · 9 min read

Most traders spend hours deciding what to buy and a few seconds deciding how much. But quantity decides how much a wrong trade hurts. Position sizing is the simple habit of choosing your quantity so that one bad trade can never do serious damage. Here’s the formula, with rupee examples.

In short: decide the maximum you’re willing to lose on one trade (many traders use about 1% of their capital), find the distance between your entry and your stop-loss, and divide the first by the second. That gives your quantity. Your stop-loss decides your size, not the other way round.

The position sizing formula

Step	Formula
1. Risk amount	Capital × risk % per trade
2. Risk per share	Entry price − stop-loss price
3. Quantity	Risk amount ÷ risk per share (round down)
4. Capital used	Quantity × entry price

For a short trade, the stop is above the entry, so risk per share is stop-loss − entry. Everything else stays the same.

Worked example: ₹1 lakh capital, 1% risk

You have ₹1,00,000 for trading and decide to risk 1% per trade, which is ₹1,000. You want to buy a stock at ₹500, and your chart says the idea is wrong if it falls below ₹490.

Risk per share = ₹500 − ₹490 = ₹10
Quantity = ₹1,000 ÷ ₹10 = 100 shares
Capital used = 100 × ₹500 = ₹50,000

If the stop is hit, you lose about ₹1,000, which is 1% of your capital. If you aim for twice your risk (a 2:1 reward-to-risk target at ₹520), a winning trade makes about ₹2,000 before charges.

Same stock, wider stop

Now suppose the chart suggests a wider stop at ₹480. Risk per share becomes ₹20, so quantity becomes ₹1,000 ÷ ₹20 = 50 shares. You buy fewer shares, but the rupee risk stays the same ₹1,000. This is the heart of position sizing: the wider your stop, the smaller your position.

Do it in seconds. Enter capital, risk %, entry and stop to get your quantity, maximum loss and target.

⚖️ Open the position size calculator

Don’t forget charges

The ₹1,000 above is the loss from price alone. In the first example, if the stop is hit on an intraday trade, charges (brokerage, STT, exchange fees, stamp duty and GST) add about ₹52.50, so the real loss is about ₹1,052.50. To keep the total loss within ₹1,000, you’d buy about 95 shares instead of 100.

Charges matter even more in futures. With a ₹1,000 risk budget, one Nifty futures round trip costs roughly ₹970 in charges at today’s rates, which uses up almost the entire budget before price even moves. That’s why a small account can’t follow the 1% rule with futures at all, and why it’s worth knowing your F&O charges before you trade.

Why 1%? The losing-streak maths

Every trader has losing streaks, even with a good strategy. The question is how much a streak costs you. Here’s what’s left of your capital after 10 losses in a row at different risk levels:

Risk per trade	Capital left after 10 straight losses
1%	about 90%
2%	about 82%
5%	about 60%
10%	about 35%

And losses are harder to recover than they look, because you’re recovering from a smaller base:

If you lose…	You need this gain just to get back
10%	11.1%
20%	25%
30%	42.9%
50%	100%
75%	300%

At 1% risk, a bad streak is a setback you can recover from. At 10%, the same streak can end your trading. The exact number isn’t magic: some traders use 0.5%, others up to 2%. What matters is choosing a small, fixed number and sticking to it.

Common position sizing mistakes

Buying a “round” quantity. Buying 100 or 500 shares because it feels right, instead of calculating, means your risk changes randomly from trade to trade.
Moving the stop to fit the quantity. Setting a tight stop just to buy more shares puts the stop where it’s convenient, not where the chart says the idea is wrong. Decide the stop first.
Raising risk after losses. Increasing size to “win it back” is how small drawdowns become big ones.
Using all of your intraday margin. Margin lets you buy more than your capital, but your loss is still real money. Position sizing should be based on your risk, not on the maximum your broker allows.
Forgetting gaps. A stock can open far below your stop after bad news, so the actual loss can be bigger than planned. Smaller positions keep gap losses survivable.

Position sizing is patience in numbers: accepting a smaller position today so you’re still trading next month. If you want to practise waiting for good setups, try Patience Pays, our free discipline game.

Track whether you really stick to your risk. Log each trade with its stop-loss in Tradyog’s free journal.

📒 Start your free journal

Frequently asked questions

Is the 1% rule 1% of my total savings or my trading capital?

It’s usually calculated on the money you’ve set aside for trading. Only trade with money you can afford to lose, and keep it separate from emergency savings and long-term investments.

What if the calculated quantity is zero?

It means your stop is too far away for your risk amount. Either skip the trade, wait for a better entry closer to the stop, or choose a different instrument. Don’t widen your risk to make the trade fit.

Does position sizing work for options?

The idea is the same: decide your maximum loss first. For a bought option, the most you can lose is the premium paid, so many traders limit the total premium (plus charges) to their risk amount, or use a stop on the premium.

Should I change my risk % as my capital grows?

Your risk percentage can stay the same; the rupee amount grows automatically as your capital grows, and shrinks after losses, which protects you during drawdowns. Recalculate your risk amount regularly, for example every month.

Is 1% risk a guarantee against big losses?

No. Gaps, very fast markets and not honouring your stop can all cause bigger losses. Position sizing reduces risk; it doesn’t remove it.

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This article is for education only and isn’t investment advice. Tradyog is not registered with SEBI as an investment adviser or research analyst. Trading involves risk of loss.