How the calculation works
Position size is derived from risk, not picked by feel. First decide the dollars you're willing to lose if the stop is hit, then divide by the per-unit loss between entry and stop. Notional and margin follow from there:
This is fixed-fractional risk — the 1–2% rule. You hold the dollar loss on any single trade constant at a small fraction of equity, so the market decides how big the position is, not your conviction. A tight stop allows a larger position for the same risk; a wide stop forces a smaller one. Because size scales inversely with stop distance, the dollars at risk stay flat whether the stop is 0.5% or 5% away, which keeps a losing streak survivable instead of account-ending.
Key concepts
Risk first, size second (the 1–2% rule)
Decide what fraction of equity you'll lose if the stop is hit — most disciplined traders cap it at 1–2% per trade — before you ever think about how many units to buy. That dollar figure plus your stop distance fully determine the position. Picking a size first and adding a stop afterward inverts the process and lets a single trade do outsized damage.
Leverage is not risk
Once size is fixed by your stop and risk amount, leverage does not change how much you can lose on the trade — that's already locked by the stop. What leverage changes is how much margin the position ties up and how far price can move before liquidation. Higher leverage frees capital but moves the liquidation price closer to entry; it does not make the same position riskier or safer at the stop.
Required margin vs equity
Required margin is the notional divided by leverage — the collateral the exchange locks to hold the position. Compare it against equity: if margin is a large share of your account, even a normal swing can trigger a margin call or liquidation before your stop fires. Keep a buffer so the position has room to breathe; margin near 100% of equity leaves none.
Risk:reward and expectancy
The risk:reward ratio compares the dollars you'd gain at the take-profit against the dollars at risk at the stop. A 1:3 setup needs to win only about one time in four to break even. Combined with your real win rate, it defines expectancy — the average result per trade. A high win rate with poor risk:reward can still lose money, and a modest win rate with strong risk:reward can be highly profitable.
This is an estimate, not a guarantee
Real fills slip, and a stop is not a floor — in a fast or gapping market price can jump straight past it, so your actual loss can exceed the modeled risk. The sizing here assumes a clean fill at the stop price. Remember that leverage does not change the loss at a stop-defined size, but it does set your liquidation distance and locked margin: too much leverage can liquidate the position before the stop is ever reached. Size conservatively and keep a margin buffer.
Frequently asked questions
How do I calculate position size for crypto trading?
Start with the dollars you're willing to lose: risk$ = equity × risk% ÷ 100. Divide that by the price distance between your entry and stop-loss to get the number of units: units = risk$ ÷ |entry − stop|. Multiply units by the entry price for notional, and divide notional by leverage for required margin. This calculator runs all four steps for you and flags when the margin exceeds your equity.
How much should I risk per trade?
A common discipline is the 1–2% rule: risk no more than 1–2% of account equity on any single trade. At 1% of a $10,000 account that's $100 at risk per trade, so even ten losses in a row cost about 10% of the account rather than wiping it out. New or more volatile setups warrant the lower end; never let a single idea risk a large fraction of equity, regardless of how confident you are.
How do I size a position from my stop-loss?
The stop distance is the whole point: units = risk$ ÷ |entry − stop|. A tighter stop lets you hold more units for the same dollar risk, while a wider stop forces fewer units. So you size the position to fit the stop, not the other way around — once your risk amount and stop are set, the unit count is fixed. Place the stop where the trade idea is invalidated, then let this formula determine the size.
Does leverage increase risk?
Not at a stop-defined size. If the position is sized so the stop costs a fixed dollar amount, leverage doesn't change that loss — it's set by the stop. What leverage does change is the margin locked and the liquidation distance: more leverage frees capital but moves liquidation closer to entry, so an adverse spike can close the position before the stop. Leverage becomes dangerous when traders use it to take a bigger position rather than to free margin on a properly sized one.
What is a good risk:reward ratio?
Many traders target at least 1:2 — risk one dollar to make two — and treat 1:3 or better as strong. The ratio interacts with your win rate through expectancy: at 1:3 you only need to win about 25% of the time to break even. There's no single correct number; what matters is that risk:reward and win rate together produce positive expectancy after fees. Enter a take-profit above and this calculator reports the ratio for your levels.
Why does my required margin exceed my equity?
It means the position the risk-and-stop math produced is too large for your account at the chosen leverage: notional ÷ leverage came out above your equity. A wide stop or a large risk percent inflates units and notional, and low leverage demands more margin. Fix it by tightening the stop, lowering risk per trade, or raising leverage — but raising leverage moves your liquidation price closer to entry, so prefer reducing risk or tightening the stop first.