Position sizing answers one question: how much of my money should go into this trade? It is the part of trading most beginners skip — and the part that decides whether a bad run is a setback or the end of the account.
The idea is simple: decide how much you are willing to lose if the trade goes wrong, then size the trade so that a loss costs exactly that — no more.
The 1–2% rule
A common guideline is to risk 1% to 2% of your trading capital on any single trade.
- On a ₹1,00,000 account, 1% is ₹1,000 and 2% is ₹2,000.
- That is the amount you lose if the stop-loss is hit — not the amount you invest.
Why so small? Because losing streaks are normal. Ten losses in a row at 2% leaves about 82% of the account. Ten losses at 10% leaves about 35% — and you now need a gain of nearly 190% just to get back to where you started.
| Risk per trade | After 10 straight losses | Gain needed to recover |
|---|---|---|
| 1% | ₹90,438 left of ₹1 lakh | about 11% |
| 2% | ₹81,707 | about 22% |
| 5% | ₹59,874 | about 67% |
| 10% | ₹34,868 | about 187% |
Working out the quantity
You need three numbers: your risk amount, your entry price, and your stop-loss price.
Quantity = Risk amount ÷ (Entry − Stop-loss)
Example. Account ₹2,00,000, risk 1% = ₹2,000. You plan to buy at ₹500 with a stop-loss at ₹480 — a risk of ₹20 per share.
₹2,000 ÷ ₹20 = 100 shares (₹50,000 invested). If the stop is hit, you lose about ₹2,000 plus costs — the amount you chose in advance.
Notice what changed the quantity: the distance to the stop, not how confident you feel. A wider stop means fewer shares; a tighter stop means more.
Sizing in F&O
Futures and options trade in lots, so you cannot buy any quantity you like — and one lot can carry a lot of risk.
- Futures: risk per lot = (entry − stop) × lot size. If that number is bigger than your risk amount, even one lot is too large for the account.
- Buying options: the most you can lose is the premium paid. Many traders treat the full premium as the risk and size so that one lot's premium fits within it.
- Selling options: the loss is not capped by the premium received. Size on the move you are protecting against, not on the premium.
Leverage makes all of this more important: a small price move becomes a large share of the account.
Common mistakes
- Sizing by conviction. "I'm sure about this one" is how one trade wipes out ten good ones.
- Choosing quantity first, stop second. The stop should come from the chart; the quantity follows from it.
- Forgetting costs. Brokerage, STT, GST and slippage add to every loss — especially in F&O.
- Adding to a losing trade without re-doing the maths — the risk quietly doubles.
Where NEOGreeks helps
The Smart Money Board marks each stock's recent highs, lows and demand/supply zones — the levels traders often use to decide where a stop-loss belongs. With the stop decided, the sizing above is simple arithmetic.