A lot of trading decisions get made backwards. Someone decides they like a stock or a coin, figures out how much cash they're willing to put in, and buys as many units as that cash allows. That approach never asks the one question that actually protects your account: how much am I willing to lose if this trade goes wrong?
Why "how much should I buy" is the wrong first question
Position sizing flips the order. Instead of starting with how much you want to invest, you start with how much you're willing to risk, then work backwards to figure out how many shares or coins that risk tolerance allows you to buy -- given where you'd exit if the trade fails. Two trades can use the same dollar amount of capital and carry wildly different risk, depending on how far your stop-loss sits from your entry.
The position sizing formula
The core calculation is straightforward: position size (in shares/units) equals your dollar risk per trade divided by your per-share risk (entry price minus stop-loss price). If you're willing to risk $200 on a trade, and your stop-loss is $4 below your entry, you can buy 50 shares -- not because $200 divided by the share price says so, but because 50 shares times $4 of risk per share equals your $200 cap.
Risk per trade vs. total capital
The dollar amount you risk per trade is usually defined as a small percentage of your total account -- commonly somewhere in the 1-2% range for people trying to survive a losing streak rather than get rich on one trade. The math matters here: risking 2% per trade means a string of losses erodes your account slowly. Risking 20% per trade means two or three bad trades in a row can be catastrophic, even if your win rate is otherwise fine.
Stop-loss distance changes everything
This is the part people skip. A tighter stop-loss (closer to your entry) lets you buy more units for the same dollar risk, because each unit is risking less. A wider stop-loss means fewer units for the same risk budget. Neither is inherently right -- it depends on the setup and the asset's normal volatility -- but the position size has to adjust to match, not stay fixed while the stop moves around.
Do the math before you place the order
The formula is simple, but doing it correctly under time pressure, with a live price in front of you, is where people cut corners. The Position Size Calculator takes your account size, risk tolerance, and stop-loss and gives you the share count directly, so the sizing decision is made before you're staring at a moving price. If you're checking current prices first, the Crypto Price Ticker and Stock Price Tracker cover both markets without needing a brokerage login.