What Is Position Sizing

Position sizing determines how much capital to allocate to each security in a portfolio. Rather than putting equal dollar amounts into every position, different methods account for volatility and risk characteristics to create more balanced allocations.

The Position Sizing tool on the platform calculates recommended share counts based on your portfolio value, selected securities, and chosen allocation method.

Two Ways to Enter Tickers

Manual Entry

Switch to the Manual tab and type ticker symbols separated by commas. For example:

AAPL, MSFT, GOOGL, JNJ, JPM, XOM

From a Watchlist

Switch to the Watchlist tab and select a watchlist from the dropdown. All stocks in that watchlist will be loaded automatically. This is the faster option if you have already built a watchlist.

Choosing an Allocation Method

The calculator offers several methods:

Equal Weight

Divides your portfolio value equally among all positions. If you have 10 stocks and a 100,000 portfolio, each gets 10,000. This is the simplest approach but ignores the fact that some stocks are much more volatile than others.

Inverse Volatility

Allocates more to lower-volatility stocks and less to higher-volatility ones. The idea is that a 2% move in a low-volatility stock is more significant than a 2% move in a high-volatility one. This method tends to create more stable portfolio returns.

ATR-Based

Uses Average True Range as the volatility measure for sizing. ATR captures the typical daily price range, making it a practical measure of how much a stock actually moves day to day.

Reading the Results

After clicking Calculate, you will see a table with:

• Ticker - Stock symbol
• Current Price - Latest available price
• Volatility / ATR - The risk measure used for sizing
• Weight - Percentage allocation to this position
• Target Value - Dollar amount allocated
• Target Shares - Number of shares to buy (rounded down to whole shares)

Sector Sunburst Chart

Below the table, a sunburst chart shows your portfolio broken down by sector. The inner ring shows sectors, and the outer segments show individual positions within each sector. This visualization helps you spot unintended sector concentration.

Futures Position Sizing

For futures subscribers, a separate position sizing calculator is available under Futures Position Sizing. This tool works differently because futures contracts have fixed multipliers:

1. Select a futures market from the sector list
2. Choose a specific contract
3. Enter your account equity and risk percentage
4. The calculator shows recommended contract quantities based on current ATR and contract specifications

The formula is: Contracts = (Account x Risk%) / (ATR x Point Value)

Practical Considerations

• Round numbers - The calculator rounds down to whole shares. Small positions in high-priced stocks may round to zero.
• Cash remainder - After rounding, you will typically have some cash left over. This is normal and acts as a small buffer.
• Rebalancing - Run the calculator periodically as prices and volatilities change. A quarterly or monthly check is common.
• Correlation - The calculator sizes positions independently. If several of your stocks are in the same sector and highly correlated, the effective risk may be higher than the individual sizes suggest.