Why position sizing changes everything
Imagine two investors who pick exactly the same stocks, with the same 60% hit rate (6 winning trades out of 10). One risks 20% of their capital on each trade, the other 2%. After a run of 10 trades, the first can have lost 60% of their capital despite good stock picking. The second remains comfortably positive.
Position sizing determines the survival of the portfolio as much as performance. On Euronext Growth small caps, where individual volatility is often 40 to 80% annualised, this point is critical.
The golden rule of sizing
Size each position according to the risk you are willing to lose — not according to your conviction about the upside. Conviction determines whether you buy. Risk management determines how much.
Size each position according to the risk you are willing to lose — not according to your conviction about the upside. Conviction determines whether you buy. Risk management determines how much.
The 3 sizing methods
Fixed-risk rule
Position = Risk € / Stop distance
Define a max risk in € (e.g. 1% of the portfolio). Divide it by the distance to your stop-loss. Simple and mechanical.
Half-Kelly
f* = (p×b − q) / b × 0.5
Maximises long-term growth. The 0.5 factor reduces volatility. Requires estimating the probability of winning.
Fixed percentage
Position = Capital × X%
The simplest method. Allocating 5% to each line gives 20 equally weighted positions. Easy but ignores specific risk.
Position size calculator
⚖️ Sizing calculator
Choose your method and enter the parameters
Fixed risk
Half-Kelly
Fixed %
Total capital (€)
Max risk per trade (%)
Entry price (€)
Stop-loss price (€)
Risk in €100 €
Distance to stop10.0 %
Amount to invest1,000 €
Number of shares117
% of portfolio10.0 %
Total capital (€)
Estimated probability of winning (%)
Potential gain (%)
Potential loss (%)
Full Kelly—
Half-Kelly (recommended)—
Amount to invest—
Capped at 15% max—
Total capital (€)
% per position
20 lines of 500 €
Amount per position500 €
Number of positions20
CommentOptimal diversification
Sizing specific to Euronext Growth small caps
Small caps have liquidity constraints that change the standard rules:
- Average daily volume: on a stock trading €30k/day, a €15k position already represents 50% of the daily volume. Exiting in a hurry will depress the price.
- Bid/ask spread: small stocks have spreads of 1 to 3%. On a round trip, that's 2 to 6% of friction cost — factor it into your risk calculation.
- The 10% rule: never take a position representing more than 10% of the average daily volume × 10 days of liquidation. Beyond that, you are "trapped" in the position.
Half-Kelly on small caps: mandatory
Full Kelly assumes your probability estimates are perfect. They never are — especially on thinly covered small caps. Half-Kelly cuts the recommended size by 50% and protects against estimation error. On Euronext Growth, always cap at 15% max of the portfolio, Kelly or not.
Full Kelly assumes your probability estimates are perfect. They never are — especially on thinly covered small caps. Half-Kelly cuts the recommended size by 50% and protects against estimation error. On Euronext Growth, always cap at 15% max of the portfolio, Kelly or not.
Kelly vs the fixed-risk rule: when to use which?
The two methods are complementary:
- Fixed-risk rule: ideal for positions with a precisely defined stop-loss (technical support, results level). Mechanical and fast.
- Half-Kelly: suited when you have an estimate of the probability of winning based on a track record. Screener Small Caps publishes the historical hit rate of its BUY signals and the gain/loss ratio — the two inputs of the Kelly formula.
Kelly module in the screener
Open the screener →
The Portfolio module automatically calculates adaptive Kelly sizing based on the ML probability and the macro regime.
Frequently asked questions
Fixed-risk method: decide the maximum amount to lose (e.g. 1% of the portfolio), divide it by the distance between the entry price and the stop-loss. Example: €10,000 of capital, max risk 1% = €100, stop at 8% → position = 100 / 8% = €1,250.
A mathematical formula calculating the optimal fraction to invest: f* = (p×b − q) / b, where p is the probability of winning, b the gain/loss ratio, q = 1−p. In practice, half-Kelly (×0.5) is used to reduce volatility.
On Euronext Growth, 10 to 15% max of the portfolio per line, even with strong conviction. Beyond that, liquidity risk becomes problematic. For a portfolio of 15 to 20 lines, positions of 5 to 8% are reasonable.
Never risk more than 1% of total capital on a single trade. That 1% represents the maximum loss if the stop-loss is hit — not the size of the whole position. This rule protects against runs of consecutive losses.
With positions of 5% each you hold 20 lines. With 10% you hold 10. Avoid portfolios of 3 to 4 lines: the individual volatility of a small cap can wipe out several years of performance.