Glossary
Position sizing: meaning, example and why it matters
Deciding how much to buy so that a loss, if your exit level is hit, stays within an amount you chose beforehand.
Worked example
With ₹5,00,000 of capital and a chosen maximum loss of 1% (₹5,000) per trade, an entry at ₹200 and an exit level of ₹190 (₹10 of risk per share) gives a size of 5,000 ÷ 10 = 500 shares.
Illustrative numbers for explanation only. They are not market data, a forecast or a suggestion.
Why it matters
It ties the quantity to the loss you have decided you can accept, instead of to how confident you feel.
Related terms
See it in practice
Frequently asked questions
Does position sizing prevent losses?
No. It limits how large a loss can be if your exit level is hit; gaps and fast markets can still produce larger losses.
Is this page investment advice?
No. Position sizing is explained in general terms with illustrative numbers. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser.
Learn these terms in order
The free Start Learning path introduces them step by step, with quizzes and practice exercises.
Start learning free →← PipAll termsPre-market and after-hours →
Educational content, not investment advice. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser. Spotted a mistake? Email marketdekho01@gmail.com.