The four sizing methods
1. Fixed-percent risk
The default. Risk a fixed % of account equity (typically 0.5–2%). Position size = (account × risk %) ÷ (entry − stop). Adapts naturally as your account grows or shrinks — winning streaks compound, losing streaks reduce automatically.
2. Fixed-rupee risk
Cap risk at a fixed ₹ per trade regardless of account size. Useful when scaling up after a large drawdown — keeps share count similar to your tested levels until you regain confidence in the strategy.
3. ATR-based
Average True Range measures recent volatility. Set your stop at, say, 2× ATR below entry for longs. The stop distance adapts to market conditions — quiet markets allow tighter stops and bigger positions; volatile markets force smaller positions automatically. Same risk %, but better-aligned to the symbol's natural movement.
4. Kelly criterion
Mathematically optimal fraction given your edge:
f* = W − (1 − W) ÷ R
where W is win rate (decimal) and R is the average win-to-loss ratio. Full Kelly is too aggressive in practice because it assumes you know your edge precisely. Most professionals use half- or quarter-Kelly. If your computed Kelly is negative, the strategy is losing-expectancy — don't trade it.
Lot sizes & minimum tick
Stocks trade in single shares (lot = 1). Indian futures and options trade in fixed lots (NIFTY = 25, BANKNIFTY = 15, etc.). Set the lot size field to the contract's lot, and the calculator rounds your suggested qty down to the nearest valid multiple.
Leverage warnings
If "% of account used" exceeds 100%, you'd need margin. Most cash-equity traders should size so position cost is < 100% of account; futures and options traders use leverage by design but should track total notional exposure carefully.
FAQ
Should I use the same risk % across all setups?
Most pros do — it makes the equity curve smoother and the long-term arithmetic predictable. If you have multiple uncorrelated strategies, you can run higher per-strategy risk knowing diversification cushions the aggregate. Single-strategy traders should stick to 1%.
Why is Kelly outputting "−5%" for me?
Negative Kelly means the strategy doesn't have a positive edge (after costs, with the win rate and R:R you provided). You'd need to either improve the win rate, raise the R:R, or stop trading that setup. Don't size positions on negative-Kelly strategies.
What ATR multiplier should I use?
1.5× to 3× ATR is the typical range. Tighter (1×) for mean-reversion, wider (2.5–3×) for trend-following so normal pullbacks don't stop you out.
Does this work for shorting?
Yes — switch the side toggle. Stop must be above entry; calculator handles the maths the same way.