Adam Khoo Position Sizing Calculator

What is Adam Khoo Position Sizing?

Adam Khoo's position sizing method is a systematic approach to determining how much of your trading capital to risk on any single trade. The method is based on the idea that you should risk a consistent percentage of your account on each trade, regardless of the trade's size or direction.

The key principles of Khoo's method are:

• Risk a consistent percentage of your account on each trade
• Use stop-loss orders to limit potential losses
• Calculate position sizes based on your account size and risk tolerance
• Adjust position sizes based on the trade's probability of success

This approach helps traders maintain consistency in their trading, reduces emotional decision-making, and provides a framework for managing risk across different trading scenarios.

How to Use This Calculator

Using the Adam Khoo Position Sizing Calculator is straightforward. Follow these steps:

1. Enter your account balance in the "Account Balance" field
2. Select your risk percentage from the dropdown menu
3. Enter the stop-loss distance in points or dollars
4. Click the "Calculate" button to see your position size
5. Review the results and adjust your inputs as needed

The calculator will display your optimal position size based on the inputs you provide. You can also view a chart that shows how your position size changes as your account balance grows.

How Adam Khoo Position Sizing Works

The Adam Khoo Position Sizing method is based on several key formulas and principles. The primary formula for calculating position size is:

Where:

• Account Balance is your total trading capital
• Risk Percentage is the portion of your account you're willing to risk on each trade (typically 1-2%)
• Stop-Loss Distance is the price difference between your entry and stop-loss orders

The calculator uses this formula to determine the optimal number of shares or contracts to trade based on your inputs. The method assumes that you'll use stop-loss orders to limit potential losses and that you'll risk a consistent percentage of your account on each trade.

Example Calculations

Let's look at a couple of examples to illustrate how the Adam Khoo Position Sizing Calculator works.

Example 1: Stock Trading

Suppose you have an account balance of $10,000 and you want to risk 1% of your account on each trade. You're trading a stock with a current price of $50 and you've set a stop-loss 2 points below your entry price.

Using the calculator:

• Account Balance: $10,000
• Risk Percentage: 1%
• Stop-Loss Distance: 2 points

The calculator would calculate:

So you should trade 2 shares of the stock in this scenario.

Example 2: Forex Trading

In a forex trading example, you have an account balance of $5,000, you want to risk 1.5% of your account, and you're trading EUR/USD with a stop-loss of 50 pips.

Using the calculator:

• Account Balance: $5,000
• Risk Percentage: 1.5%
• Stop-Loss Distance: 50 pips

The calculator would calculate:

So you should trade 1.5 lots of EUR/USD in this scenario.