How to calculate position size with trading costs
Position sizing starts with a loss amount you can afford, not a profit target. A planning calculation describes a scenario; it cannot cap the loss in a fast or gapping market.
State the assumptions
For an unleveraged long equity example, enter a planned entry, stop level and cash risk budget. Estimate commissions and other costs separately. Use consistent currencies and units.
A worked share example
Suppose the cash risk budget is £40, planned entry is £10, stop level is £9.80 and estimated round-trip costs are £4. The price distance is £0.20. The planning size is floor((£40 − £4) ÷ £0.20) = 180 shares, with £1,800 entry notional.
That result assumes execution at the entered prices and costs. Check that the notional also fits available capital. If estimated costs reach the entire risk budget, the model leaves no budget for price movement.
Understand what the formula misses
- A stop can fill away from its trigger price, particularly after a gap.
- Spreads and slippage change the effective entry and exit.
- Short positions, derivatives and leveraged trades need their own exposure and margin calculations.
- Borrowing, funding, tax and currency costs may add to the loss.
The free Scalper Desk planner is for research. It does not send orders, recommend a trade or guarantee a maximum loss. Day trading can cause substantial losses; use the original broker documentation to understand execution and product risks.