The System · Layer 3 — Execute
Position Sizing
The setup tells you what to buy. Your stop tells you how much. Size every trade the same way, every time — so one bad call can never take you out of the game.
Position Size Calculator
Recommended: 0.5–1% per trade. Many traders treat 2% as a hard ceiling — a limit, not a target. The smaller your risk per trade, the longer a losing streak you can survive without real damage.
Why this is the number that matters
Most traders pour all their energy into what to buy and almost none into how much. That's backwards. You can be dead right about the stock and still wreck your account if the position is too big. Sizing is the skill that keeps you in the game long enough for your edge to actually show up. It's the same math on every trade. Boring is the point.
The one rule: risk a small, fixed slice
Pick a percentage of your account you're willing to lose if a trade hits its stop — and use that same percentage on every trade. Not a fixed dollar amount. Not a fixed number of shares. A fixed percentage of risk.
"Risk" here means one specific thing: the gap between your entry and your stop (the price where you admit you're wrong and get out), multiplied by how many shares you hold. That number — what you lose if the stop hits — is what you're keeping small and constant.
We recommend 0.5–1% per trade. A lot of traders cap it at 2% and never cross it. Keeping it small is what lets you take ten losses in a row and still have an account.
Your stop sets your size — not the other way around
This is the part nearly everyone gets backwards. You don't pick the share count first. You decide how much you're willing to lose, and then the distance to your stop tells you the shares.
- Tight stop → small risk per share → you can hold more shares for the same dollar risk.
- Wide stop → big risk per share → you hold fewer shares.
Same money on the line either way. Look at two of our own paper trades: ARM had a tight stop, so the same risk budget bought a larger share count — and it ran. LRCX had a wide stop, so that identical budget bought far fewer shares. The stop isn't just where you're wrong. It's the input that sizes the entire trade.
A stop answers "where am I wrong." Your size is just the math that falls out of it.
The formula, in plain English
Two ways to see the exact same thing:
- In dollars: (Account × Risk%) ÷ (Entry − Stop) = shares. Round down.
- In percent: Risk% ÷ Stop-distance% = your position as a percentage of the account.
Example: a $10,000 account, risking 0.5% ($50), on an entry of $100 with a stop at $92 (that's $8 of risk per share). $50 ÷ $8 = 6.25 → round down to 6 shares. A $600 position — and if the stop hits, you lose about $48, right at your planned risk.
The 25% cap — why a tight stop doesn't mean go all-in
Run the math on a really tight stop and it'll sometimes tell you to dump 60–80% of your account into one stock. Don't. Cap any single position at 25% of your account — the calculator enforces this automatically.
Here's why it matters: a stop only protects you while the market is open. A stock can gap — open far below your stop overnight on earnings or news — and you eat the whole drop, not your planned risk. We exited AVGO in profit right before it gapped down roughly 20% on earnings. A stop can't save you from a move like that. The cap can. It's your protection for the day the stop can't do its job.
Your numbers, worked through
Example — fill in the calculator to see your own
Size down when the market's against you
Your edge is bigger in a strong tape and smaller in a weak one — so scale your risk to conditions. When the scanner's market reading is green, take full size. When it's mixed or red, take a fraction. When it's risk-off, the right size is zero — no new positions. The market-conditions control in the calculator does this for you, and it's built to match the scanner's stoplight, so the page and the tool always agree.
The mistakes that blow up accounts
- Sizing by how much you want to make, instead of how much you can lose.
- Ignoring the stop and just buying a round number of shares.
- Going bigger because you're "sure" this one's different.
- Averaging down — adding shares to a loser as it falls.
Every one of these is the same error wearing a different hat: letting emotion set the size instead of the math.
Where this fits
Learn the patterns, identify the setup on the scanner, execute by sizing it here, then track the result. The scanner already hands you an entry, a stop, and a risk level. This is the step that turns those three numbers into an actual order — the same way, every single trade.
Odd Lot is a research and education tool. Nothing here is financial advice or a recommendation to buy or sell any security — you're responsible for your own trades. You don't get signals. You get structure.