Position size should come from your risk plan, not from confidence or the need to recover a loss. Calculate it before the order so that one trade does not take more risk than you intended.
For a risk-based trade, you need three inputs: entry price, stop-loss price and the rupee amount you are prepared to risk.
The basic position-size formula
First calculate risk per unit:
Risk per unit = Difference between entry and stop-loss
Then calculate quantity:
Quantity = Rupee risk limit ÷ Risk per unit
For example, assume an option entry at ₹100 and a stop-loss at ₹90. The risk is ₹10 per unit. If your planned risk is ₹2,000, the raw quantity is 200 units.
For derivatives, the final quantity must follow the permitted lot size. Round down to a valid quantity. Rounding up can take the risk above your limit.
Include the details the simple formula misses
The formula is a planning estimate. Actual loss may be higher because of:
- Slippage between the stop trigger and the fill.
- A gap through the stop price.
- Brokerage, taxes and other charges.
- A delayed or failed connection.
- An invalid or rejected exit order.
Leave room for these costs. Do not treat ₹2,000 in the formula as a guaranteed maximum loss.
Three common ways to choose size
Risk-based size
Set a fixed rupee risk or a percentage of capital. Quantity changes when the stop distance changes. A wider stop gives a smaller position. A tighter stop gives a larger position.
Fixed lots
Use the same number of lots for each eligible trade. This is simple, but the rupee risk changes when the stop distance or instrument price changes.
Capital-based size
Use a chosen percentage of available capital. This controls how much capital enters the trade, but it does not directly control the loss at the stop.
Pick one method in advance. Do not switch methods after seeing a setup just to obtain a larger quantity.
Calculate size in the right order
- Mark the entry based on the setup.
- Put the stop where the trade idea becomes invalid.
- Calculate the distance between entry and stop.
- Apply your rupee or percentage risk limit.
- Round down to a valid lot quantity.
- Check the estimated loss again before placing the order.
Do not move the stop closer only to create a larger position. That changes the trade plan.
How Zensibly supports position sizing
Zensibly's Smart Position Tool supports capital-based, fixed-lot and risk-based sizing. In Risk ₹ mode, quantity is calculated so the planned loss at the stop-loss is close to the chosen rupee amount. The tool also shows target profit and stop-loss risk in points and rupees before entry.
Want to compare the available sizing methods before choosing a plan? See position sizing in the Zensibly feature overview.
Position-size checklist
- Entry is based on the setup.
- Stop-loss is based on invalidation, not desired quantity.
- Risk amount fits the daily plan.
- Quantity is rounded down to a valid lot size.
- Estimated charges and slippage have been considered.
- Target profit and stop-loss risk are visible before entry.