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Position sizing and stops

How a fixed risk per trade sets the share count, and where the math breaks

Risk per trade

Position sizing starts from the loss you'd accept if a trade goes wrong, as a share of the account. With a $25,000 account and 1% risk, that's $250.

From risk to shares

Divide that amount by the distance from entry to stop. Entry $50 and stop $47.50 is $2.50 per share, so $250 / $2.50 = 100 shares. A wider stop means fewer shares for the same risk.

Reward to risk (R)

If the target is $56, the possible gain is $6 per share against $2.50 of risk, or 2.4R. R describes one setup's arithmetic; it says nothing about how likely the target is.

Where it breaks

A stop isn't a guarantee. Prices can gap past it overnight, on news or after a halt, so the real loss can be larger. Fees, spreads and slippage add to it, and many trades in the same direction can all go wrong together.

Educational only. Describes ideas and how Coteau shows them; not a forecast and not advice.

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Systematic research · Not investment advice · Hypothetical unless marked Live · Data: Yahoo Finance (15-min delayed), SEC EDGAR, House Clerk · Important disclosures · Contact desk@coteau.app

Coteau 0.9 · Oct 21, 2026