Four numbers worth separating
- Risk budget: The dollar amount you choose to put at risk under a planned exit assumption.
- Share count: How many shares the trade uses.
- Notional exposure: Share count multiplied by entry price.
- Full-loss exposure: What could be lost in a severe adverse move, potentially the entire long position and more than the initial proceeds in a short.
Position size sometimes means share count and sometimes notional value. RiskSized labels both so the units stay visible.
One account, two very different purchases
Suppose you have a $25,000 account and choose a $250 risk budget. The stock enters at $50.
| Plan | Stop | Shares | Notional |
|---|---|---|---|
| A | $45 | 50 | $2,500 |
| B | $49 | 250 | $12,500 |
Both plans have the same simple planned loss: $250 before costs. Plan B uses five times the capital and is far more sensitive to a gap through the stop. Equal risk-budget labels do not make the trades equivalent.
The approximation becomes less accurate as you add commissions, slippage and actual execution away from the planned stop. RiskSized includes the first two and warns about the third.
The risk budget is not a safety guarantee
A long stock can fall below your stop or to zero. If you hold 250 shares bought at $50, a complete loss is $12,500, not $250. A short position can rise without a fixed upper bound, creating theoretically unlimited loss.
This is why buying power and allocation caps matter independently of the risk formula. A trade can fit a 1% stop-loss budget while still being too large or too concentrated for the account.
Instead of asking only “How much can I make with $250?”, ask “What share count fits my risk, buying power and concentration limits, and what happens if the exit is worse than planned?”
Use consistent units
When entering risk as a percentage, multiply it by account equity to obtain the dollar budget. If using a fixed dollar amount, compare it with equity yourself. Then inspect the final stop scenario as both dollars and a percentage of equity. That last check often reveals input mistakes immediately.