How much should I risk per trade?

That is a personal choice based on how much drawdown you can accept. Many educators use 0.5% to 2% of capital as an example range.

Why round down for F&O lots?

Lots must be whole numbers. Rounding up would push your risk above the limit you set, so rounding down keeps you within it.

Does position sizing work with a gap?

Only partly. If price gaps past your stop, the fill can be worse than planned, so the actual loss can exceed your chosen risk.

Should position size depend on how confident I feel?

Fixed-fractional sizing deliberately ignores confidence. The same rupee risk on every trade stops a few bad calls from doing outsized damage.

Position sizing explained

Updated 11 October 2026

Position size calculator →

Position sizing answers one question: how many shares or lots should you buy on this trade? Most beginners decide by how much money they have or how confident they feel. A steadier approach is to decide first how much you are willing to lose if the trade fails, and work backwards from there.

Fixed-fractional risk

The most common method is called fixed-fractional sizing. You risk the same small percentage of your trading capital on every trade. Many educators use 0.5% to 2% as an example range; the right number is personal and depends on how much drawdown you can tolerate.

The formula is:

Quantity = (capital × risk%) ÷ (entry − stop-loss)

The top half is your rupee risk for the trade. The bottom half is the risk per share. Dividing one by the other tells you how many shares make that risk add up to your limit. For a short trade, use (stop-loss − entry) in the bottom half.

Worked example: shares

You have ₹5,00,000 of trading capital and choose to risk 1% per trade.

Rupee risk = ₹5,00,000 × 1% = ₹5,000
You plan to buy Stock ABC at ₹800 with a stop at ₹780. Risk per share = ₹800 − ₹780 = ₹20
Quantity = ₹5,000 ÷ ₹20 = 250 shares
Position value = 250 × ₹800 = ₹2,00,000

If the stop is hit at ₹780, you lose 250 × ₹20 = ₹5,000, which is 1% of capital, before costs and before any slippage. Notice that the position value (₹2,00,000) is much larger than the risk. That is normal. Risk is set by the stop, not by how much you invest.

Now move the stop wider to ₹760. Risk per share becomes ₹40, and quantity drops to ₹5,000 ÷ ₹40 = 125 shares. A wider stop means a smaller position, so the rupee risk stays the same. The position size calculator does this instantly.

Worked example: F&O lots

Futures and options trade in fixed lots, so you cannot buy 1.7 contracts. You calculate the risk per lot and round down to a whole number of lots. Rounding up would break your risk limit.

Say a Stock XYZ future has a made-up lot of 100 shares. You plan to buy at ₹1,200 with a stop at ₹1,170.

Risk per lot = (₹1,200 − ₹1,170) × 100 = ₹3,000
Lots = ₹5,000 ÷ ₹3,000 = 1.67, rounded down to 1 lot
Actual risk = ₹3,000, or 0.6% of capital

With a tighter stop at ₹1,185, risk per lot is ₹15 × 100 = ₹1,500, and ₹5,000 ÷ ₹1,500 = 3.33, so you would take 3 lots with a total risk of ₹4,500. If even one lot risks more than your limit, the honest answer is to skip the trade or use a smaller instrument. Real lot sizes are published by NSE and change over time; see lot size.

For bought options, your maximum loss is the premium paid, so some traders size by premium: lots = rupee risk ÷ (premium × lot size). For sold options, the loss can be much larger than the premium, and simple formulas understate the risk.

Why this matters more than entries

Losing streaks happen to everyone. Here is what a run of ten losses does with 1% risk versus 5% risk, each loss taken from the remaining balance:

Risk per trade	Capital after 10 straight losses (from ₹5,00,000)
1%	about ₹4,52,000 (down about 9.6%)
2%	about ₹4,08,500 (down about 18.3%)
5%	about ₹2,99,400 (down about 40.1%)

A 40% drawdown needs a gain of about 67% just to get back to where you started. Small, consistent risk keeps you in the game long enough to find out whether your approach works at all.

Practical checks

Margin and leverage. The formula may suggest a position larger than your margin allows. The lower of the two wins.
Costs. Brokerage and taxes add to each loss. Estimate them with the brokerage calculator.
Gaps. A stop can be skipped when price opens beyond it, so real losses can exceed the plan. See stop-loss.
Liquidity. In thinly traded stocks, a large order can move the price against you.

Risk reminder

Position sizing controls how much you lose when wrong; it does not make you right more often. SEBI's studies (2023 and 2025) found about 9 in 10 individual F&O traders lost money in the years studied (SEBI). Pair sizing with a realistic risk-reward ratio and honest records.

Questions people ask

How much should I risk per trade?: That is a personal choice based on how much drawdown you can accept. Many educators use 0.5% to 2% of capital as an example range.
Why round down for F&O lots?: Lots must be whole numbers. Rounding up would push your risk above the limit you set, so rounding down keeps you within it.
Does position sizing work with a gap?: Only partly. If price gaps past your stop, the fill can be worse than planned, so the actual loss can exceed your chosen risk.
Should position size depend on how confident I feel?: Fixed-fractional sizing deliberately ignores confidence. The same rupee risk on every trade stops a few bad calls from doing outsized damage.