Frequently Asked Questions
Why size a position by risk instead of just by how much I want to invest?
Buying a fixed rupee amount of every trade means a wide stop-loss risks far more of your account than a tight one, for no good reason. Sizing by risk instead keeps every trade's potential loss consistent — exactly your intended risk percentage of the account — regardless of how far away the stop-loss happens to be.
What risk percentage should I use per trade?
There's no universal answer, but 0.5–2% per trade is a commonly used range among systematic traders — enough to matter, small enough that a string of losing trades doesn't seriously damage the account. Higher risk per trade means faster growth and faster drawdowns both.
What does the risk/reward ratio actually tell me?
It compares your potential loss to your potential gain on the same trade — a 1:2 ratio means you stand to gain twice what you're risking if the target is hit. A favorable ratio doesn't guarantee a winning trade, but it means you can be right less than half the time and still come out ahead over many trades.
Does this account for brokerage fees or slippage?
No — it calculates the pure risk-based position size from your entry and stop-loss prices. Fees and slippage will make the real-world loss on a stopped-out trade very slightly larger than the calculated risk amount.