Position sizing: the 1% rule and the formula
After this lesson you can calculate exactly how many shares or coins to buy so that hitting your stop costs a small, fixed part of your capital, using units = risk amount / (entry - stop).
Position sizing: 1% rule aur formula
Aksar log jazbat se size tay karte hain: 'yaqeen zyada hai to paisay zyada.' Sahi tarteeb ulti hai. Pehle stop tay karein, yani woh price jahan aap ka idea ghalat saabit ho. Phir tay karein ke us stop par capital ka kitna hissa khona qubool hai, aam taur par 1%, aur naye log 0.5%. Phir size nikaalein. Risk ka matlab lagayi hui raqam nahi, balkay stop par hone wala nuqsan hai.
Formula: units = risk amount / (entry - stop). Rs 500,000 ke account par 1% risk Rs 5,000 hai. Entry Rs 250 aur stop Rs 235 ho to risk per share Rs 15, yani 333 shares aur position Rs 83,250. Stop door ho to units kam, magar rupee risk wahi. 1% risk par 10 lagataar nuqsan ke baad bhi takreeban 90% capital bachta hai, jabke 10% risk par sirf 35%.
Maal amanat hai. Quran 4:29 baahmi razamandi ki tijarat ki ijazat deta hai aur Quran 17:26-27 maal zaya karne se rokta hai. Aadhi bachat ek tip par, baghair exit ke, laga dena tijarat kam aur zaya karna zyada hai, chahe nateeja kuch bhi ho. Chhota aur pehle se tay nuqsan hi amanat ki amli hifazat hai.
- Pehle stop, phir risk amount, phir size.
- 1% risk par 10 nuqsan ke baad bhi takreeban 90% capital bachta hai.
- Stop door ho to position chhoti karein; rupee risk wahi rahe.
Poora sabaq neeche English mein hai. Quiz English mein hai; asaan alfaaz mein.
Imran runs a small sports-goods workshop in Sialkot and had Rs 300,000 set aside for investing. A friend's tip about a coin sounded strong, so he put Rs 150,000 into it, half his pot, with no stop. The coin fell 40% in ten days. He lost Rs 60,000, a fifth of everything he had saved for investing. His idea might even have worked later. It no longer mattered. The size of the position, not the idea, decided the damage.
Size is decided by the stop, not by excitement
Most beginners decide size by feeling: 'I am confident, so I will put in more.' Careful traders reverse the order. First they choose where the idea is proven wrong: the stop. Then they decide how much of the account they are willing to lose if that stop is hit. Only then do they calculate the size. Confidence changes nothing in this sequence.
The widely used guide is the 1% rule: risk no more than 1% of your trading capital on a single trade. Beginners can use 0.5%. Risk here means the loss if the stop is hit, not the amount you invest. With a Rs 500,000 account, 1% risk is Rs 5,000. You might invest Rs 80,000 in a position and still risk only Rs 5,000.
The formula, step by step
Units to buy = risk amount / (entry price - stop price). The bottom part is your risk per unit. A tight stop allows more units and a wide stop fewer, but the loss at the stop stays the same. In spot trading you can never buy more than your cash, and that is a protection, not a limit. If the formula asks for more than you have, the stop is probably too tight.
- Step 1: capital x risk % = risk amount.
- Step 2: entry - stop = risk per unit.
- Step 3: risk amount / risk per unit = units (round down).
- Step 4: units x entry = position value. Does it fit your cash and your concentration limit?
- Step 5: leave a small allowance for fees and slippage.
Why small risk wins over time
Every method has losing streaks. At 1% risk, ten losses in a row leave you with 90.4% of your capital: painful but recoverable. At 10% risk, the same streak leaves 34.9%, and you would need almost +187% just to get back to where you started. The 1% rule does not make anyone rich quickly. It keeps you in the game long enough for skill and patience to matter.
Worked example: PSX shares and BTC
PSX: capital Rs 500,000, risk 1% = Rs 5,000. Suppose entry is Rs 250 and the stop Rs 235, so risk per share = Rs 15. Shares = 5,000 / 15 = 333.3, rounded down to 333. Position value = 333 x Rs 250 = Rs 83,250. If the stop is hit, the loss is 333 x Rs 15 = Rs 4,995, plus fees.
Crypto: capital $3,000, risk 1% = $30. Suppose BTC entry is $60,000 and the stop $57,000, a risk of $3,000 per BTC. Size = $30 / $3,000 = 0.01 BTC, a $600 position. With a stop at $58,800 instead, size = $30 / $1,200 = 0.025 BTC, a $1,500 position. Tighter stop, bigger position, the same $30 at risk, but only if $58,800 is a sensible stop for that chart.
Wealth in Islam is an amanah, a trust you will be asked about. Quran 4:29 permits trade by mutual consent, and trade is a lawful way for that trust to grow. Quran 17:26-27 warns against squandering wealth. Putting half of your savings into one tip, with no exit, drifts from trade toward squandering, whatever the result turns out to be. Sizing every position so that a loss is small and planned is how the trust is protected in practice. It also keeps your sleep, your mood and your household out of the trade.
Education, not a fatwa. Where scholars differ, we say so. See what scholars say.
Deciding size by confidence or by a round number ('let me put in Rs 100,000') and only then thinking about the stop, if at all. The stop then lands where the loss 'feels OK', not where the idea is wrong. This one habit damages more accounts than any bad indicator reading.
Open the position size calculator. Enter your real trading capital, 1% risk, and an example trade with entry and stop taken from a chart you studied this week. Note the units and the position value. Now move the stop twice as far away and recalculate. Write down how the position changed, and why your risk in rupees did not.
Open position calculator →Key takeaways
- Decide the stop first, then the risk amount, then the size: units = risk amount / (entry - stop).
- Risking about 1% per trade keeps a losing streak survivable; at 10% the same streak is ruinous.
- A wider stop means fewer units, so the rupee risk stays the same.
Check yourself
Pass with 2 of 3 to complete the lesson. Answers are checked on our server, so the certificate means something.
Barqish is an educational platform. Nothing here is financial advice or an instruction to buy or sell, and screening is not a fatwa. Spot ownership only: no leverage, no short selling. Updated 30 September 2026.