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Wednesday, May 13, 2026
CSCO stock | Cisco’s stock pops 17% on surging AI orders, as company says it’s cutting almost 4,000 jobs
Cisco’s stock pops 17% on surging AI orders, as company says it’s cutting almost 4,000 jobs
Key Points
- Cisco reported better-than-expected earnings and revenue.
- Heading into earnings, Wall Street was showing increased optimism around the networking company, which has trailed many of its data center peers during the AI boom.
- The company showed off new networking switches and routers during the quarter.
Cisco shares soared 17% in extended trading on Wednesday after the networking company issued results and guidance that topped Wall Street’s projections.
The company said it’s cutting its workforce this quarter by fewer than 4,000 jobs, representing less than 5% of total employees.
Here’s how the company did in comparison with LSEG consensus:
- Earnings per share: $1.06 adjusted vs. $1.04 expected
- Revenue: $15.84 billion vs. $15.56 billion expected
Revenue increased 12% in the quarter ended April 25, from $14.15 billion a year earlier, Cisco said in a statement. Net income rose to $3.37 billion, or 85 cents per share, from $2.49 billion, or 62 cents per share, a year earlier.
For the fiscal fourth quarter, Cisco called for $1.16 to $1.18 in adjusted earnings per share on $16.7 billion to $16.9 billion in revenue. Analysts polled by LSEG were looking for $1.07 in adjusted earnings per share on $15.82 billion in revenue.
Cisco said it has received $5.3 billion in artificial intelligence infrastructure and hyperscaler orders so far this year, and raised its expected orders for the fiscal year to $9 billion, up from $5 billion. The company said it expects fiscal-year revenue in that market of $4 billion, up from a prior projection of $3 billion.
While Cisco has trailed many of its data center peers in the AI race, Wall Street has been rallying to the company’s story of late, pushing the stock to a record late last year, finally surpassing its dot-com high. The shares have continued to climb this year, gaining 33%, topping the Nasdaq’s 14% advance.
Should the stock maintain its after-hours gains through Thursday, it would mark the sharpest rally since 2002.
CEO Chuck Robbins wrote in a blog post on Wednesday that the latest round of job cuts will begin on May 14. Cisco is the latest company to announce head count reductions tied to AI.
“The companies that will win in the AI era will be those with focus, urgency, and the discipline to continuously shift investment toward the areas where demand and long-term value creation are strongest,” Robbins said. “I’m confident Cisco will be one of those winners. This means making hard decisions — about where we invest, how we’re organized, and how our cost structure reflects the opportunity in front of us.”
Cisco said in a filing that severance and other costs will result in pre-tax charges of $1 billion, and that the company will recognize about $450 million of that in the fiscal fourth quarter.
During the third quarter, Cisco announced switches and routers that use its next-generation processor. The company also debuted a leaderboard for ranking generative AI models based on their robustness against cybersecurity attacks.
Cisco’s networking revenue increased 25% to $8.82 billion, exceeding the $8.47 billion consensus among analysts polled by StreetAccount. Security revenue was flat at about $2 billion, compared to StreetAccount’s $1.99 billion consensus.
Executives will discuss the results with analysts on a conference call starting at 4:30 p.m. ET.
How To Reduce Risk With Optimal Position Size
How To Reduce Risk With Optimal Position Size
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Trading without proper position sizing is essentially trading without a strategy. Mastering this critical skill—neither spending too much nor too little on a given position—helps protect you from devastating losses while improving your gains when your strategy pans out.
“Position sizing is the glue that holds together a sound trading system,” Brijesh Bhatia, an equity capital market analyst at Definedge, told Investopedia. “It ensures you don’t over-leverage or under-commit in any single trade, helping you stay in the game long enough to let your edge play out over a series of trades.”
Position sizing is thus crucial—the difference between traders who last and those who crash and burn.
Key Takeaways
- Position sizing involves determining how much money to spend on each trade.
- Without a sizing strategy, traders either end up too safe (stunting growth) or too aggressive (risking a wipeout).
- Smart sizing considers your risk tolerance, stop losses, market volatility, and the specific opportunity at hand.
- Methods for specifying your position size include fixed dollar amounts, percentage-based allocation, volatility adjustments, and mathematical formulas, such as the Kelly Criterion.
Understanding Position Size
Position sizing transforms the abstract concept of risk management into concrete action—it's how you decide exactly how much capital to commit to each trade. Without a thoughtful position sizing plan, you're either leaving money on the table with overly cautious allocations or risking catastrophic losses with aggressive bets. Finding your sweet spot helps you weather inevitable market downturns while still generating meaningful returns.
It also helps you take emotion out of your trading. When you preset exactly how much to trade, you're less likely to make impulsive decisions during market volatility, such as abandoning your strategy at the first sign of trouble or moving your stop loss in the heat of the moment.
Factors Influencing Position Size
Determining an acceptable position size requires careful consideration. The following factors are among those to consider:
Risk Tolerance
Risk tolerance is the amount of loss a trader is prepared to endure. Everyone wants to earn bumper returns, but not everyone can or should put everything on the line to achieve that.
Account Risk
Establish the maximum you’re willing to risk per trade. A general rule of thumb is never to risk more than 2% of your available capital on any single trade.
Stop-Loss Orders
Place a stop-loss order, and your trade automatically closes once the price drops by the amount you specify. This is an essential risk management tool for traders and has a big impact on position size as it dictates the maximum amount that can be lost in a trade.
The process is straightforward: set your exit price first, then calculate your position size based on that threshold. When done right, even if the market moves against you and triggers your stop, you'll never lose more than your preset risk limit per trade. You can also use it to protect profits if the stock price has increased since you bought it.
Volatility
Not every security has the same risk profile. McDonald’s Corp.’s (MCD) shares, for example, are much steadier than Bitcoin's valuation. Position sizes for more volatile assets should be smaller to account for their potential for bigger price swings.
Correlation
Correlation measures how closely two securities move in relation to each other. Highly correlated assets tend to rise and fall together, while negatively correlated assets typically move in opposite directions.
Diversification only works when you truly spread your risk across unrelated assets. Loading up on different allocations with a high correlation leaves too little diversification.
Market Conditions
In periods of economic uncertainty and volatile financial markets, it could make sense to reduce your position sizes. Opportunities for gains are higher but so are the chances of heavier losses.
Ways To Determine Your Position Sizes
Here are some of the best-known position sizing methods:
Fixed-Dollar Position Sizing
This method involves allocating a preset amount to each trade regardless of its price or volatility. For example, if you had $10,000 to trade, you might allocate $1,000 to each trade. Every time you trade, you trade the same fixed amount.
Percentage of Portfolio Position Sizing
With this approach, a fixed percentage of your portfolio’s value is allocated to each trade. The aim is to ensure that the risk you take scales proportionately with your account.
What’s the right percentage? That depends on your risk tolerance and the type of assets you’re trading, with bargains often getting allocated a bit more.1
Volatility-Based Position Sizing
Volatility-based sizing adjusts position sizes based on expected or historical price swings. In other words, the cap on how much money to spend per trade would be lower for volatile assets and rise for assets displaying less price movement.
How is volatility measured? Various indicators can be used, with the average true range (ATR) a popular one.
Kelly Criterion Position Sizing
The Kelly criterion is a mathematical formula used by traders to determine the optimal percentage of their capital to allocate for each trade.
It is based on two components: the win probability, which represents the likelihood that a trade will post a gain, and the win-loss ratio, which is the total number of winning trades divided by the total number of losing trades in a specific period.
The number generated by the Kelly criterion, which can also be calculated on various websites, is the percentage of the total money you have available that you should risk per trade.
Pyramid Position Sizing
Pyramiding is an approach where you gradually increase your position size as the trade moves in your favor. Think of it as doubling down on winning hands—systematically adding to successful trades rather than chasing losses.
This method allows you to establish a foothold with less risk, then build your exposure only after the market confirms your analysis. However, pyramiding demands discipline and clear exit rules, as it concentrates your capital in fewer assets.
Daily Stop Levels
Active traders often use daily stops, set by a maximum loss limit for each day. Once the preset amount of money is lost, all positions must be exited and trading must stop until the period is over.
Experienced traders might set a daily stop equal to their average daily profitability. Doing so means a bad trading session won’t wipe out more than a day’s worth of average profit.
Stop levels can also be set for a period of several days, a week, a month, and so on.
Example of Position Sizing in Action
Suppose you have a $25,000 trading account and follow the 2% rule—meaning you'll never risk more than $500 on any single trade (2% of $25,000). You're eyeing shares of Tesla (TSLA) trading at $225. Your analysis suggests a logical stop-loss point at $195, giving you a potential $30 per share downside risk.
The calculation is straightforward:
- Maximum risk per trade: $500
- Risk per share: $30 (the difference between current price and stop-loss)
- Position size calculation: $500 ÷ $30 = 16.67 shares
Following your position sizing strategy, you can purchase 16 shares of Tesla ($3,600 total for the trade) while maintaining your risk management rules. If the stock hits your stop-loss, you'll lose about $480—just under your maximum risk threshold.
Common Mistakes in Position Sizing
Adopting a position sizing method doesn’t guarantee success. Here are some mistakes:
- Ignoring volatility: Not all investments have the same characteristics and many position-sizing approaches ignore this.
- Not placing or removing stop-loss orders: Without these exit tools, the potential downside is much higher.
- Not sticking to the plan: After a successful or losing trade, it can be tempting to abandon the rulebook and become more aggressive. That's a dark path to head down.
- Not using a trading journal: It’s important to log your position sizes and strategies so you can learn from them later.
The Bottom Line
Position sizing doesn’t guarantee profits. Some models are overly simplistic, and there’s more to trading than ensuring you don’t bet too much or too little. That said, it helps promote discipline, a key trait for successful trading, and protects you from the perils of being over- or under-exposed to specific trades.
Position size | Risk managment | Adjusting Position Size: Managing Risk Without Sacrificing Profit Potential
Adjusting Position Size: Managing Risk Without Sacrificing Profit Potential
Master risk management in trading with effective position sizing techniques to protect your capital while pursuing growth.
Position sizing is the backbone of managing risk in trading. It determines how much capital you allocate to each trade, helping you protect your account from significant losses while still allowing for growth. Here’s the essence:
- Why It Matters: Position sizing ensures you don’t risk too much on a single trade, keeping your account safe from market volatility.
- Key Methods:
- Fixed Dollar Amount: Allocate a set dollar amount per trade.
- Percentage of Account Equity: Risk a fixed percentage of your total account value.
- Volatility-Based: Adjust position size based on market volatility using tools like ATR.
- Risk-Reward Ratio: Balance potential loss against expected gain.
- Common Mistakes: Ignoring volatility, overconfidence after wins, or increasing positions mid-trade can lead to losses.
- Practical Steps: Define your risk tolerance, calculate risk per unit, and determine position size using a straightforward formula.
Effective position sizing isn’t about making every trade a win – it’s about staying consistent and disciplined over time. LuxAlgo provides trading indicators and AI backtesting on TradingView and the web to help refine your strategy with data-driven insights and backtesting. Explore the main site and the Indicator Library for free indicators.
4 Core Position Sizing Methods
Position sizing is a key element of successful trading. It helps you manage risk and make the most of your trades without overextending yourself. Below, we'll break down four core methods for determining position size. Each has its strengths and is suited to different trading styles and situations. These methods will lay the groundwork for a detailed step-by-step guide later.
Fixed Dollar Amount Method
This method is as straightforward as it gets. You allocate a fixed dollar amount to every trade. For example, you might decide to invest $1,000 in each trade, whether you're buying a pricey stock at $180 per share or a more affordable one.
While this approach is simple, it has its limits. As your account grows, that $1,000 becomes a smaller fraction of your total capital. This means you might not fully leverage your increased buying power. Additionally, this method doesn’t account for the varying risk or volatility of different assets.
Percentage of Account Equity Method
The Percentage of Account Equity Method scales with your account size. Here, you risk a fixed percentage of your total account value on each trade. For example, many traders stick to risking 1% to 2% of their account per trade. See a deeper overview of position sizing concepts here.
If you have a $50,000 account and risk 2%, each trade would put $1,000 at risk. As your account grows to $75,000, your risk per trade increases to $1,500. This method adjusts automatically as your account value changes, but it doesn't factor in market volatility, which can still leave you exposed to unexpected swings.
Volatility-Based Position Sizing
This method takes market volatility into account. By using tools like the Average True Range (ATR), you can size your positions based on how much an asset typically moves. The idea is simple: reduce your exposure in volatile markets and increase it when conditions are calmer.
Let’s say you have a $100,000 account and are willing to risk 0.5% per trade, or $500. If a stock is trading at $20 with an ATR of $0.50, you could buy 1,000 shares and set your stop-loss $0.50 below the entry price. This caps your risk at $500. In more volatile conditions, this method helps you control losses by automatically reducing your position size.
Risk-Reward Ratio Analysis
The Risk-Reward Ratio Analysis method focuses on weighing your potential loss against your expected gain. Before entering a trade, you define your risk-reward ratio and adjust your position size accordingly. Learn the differences between risk/reward and win rate in LuxAlgo’s overview here.
For example, scalpers, day traders, and swing traders often aim for risk-reward ratios of 1:1.5, 1:2, or 1:3, respectively. If you buy 100 shares at $20, set a stop-loss at $15, and aim for a target price of $30, you’re risking $5 per share to potentially gain $10 – a 1:2 risk-reward ratio.
Finding Your Fit
The best position sizing method depends on your trading experience, risk tolerance, and the market environment. Beginners often start with simpler methods like the Fixed Dollar or Percentage of Account Equity approaches. As you gain confidence and skill, transitioning to more advanced techniques like Volatility-Based Sizing or Risk-Reward Analysis can help refine your strategy. The key is consistency – choose a method you can stick with over the long term.
How to Calculate Position Size: 3-Step Process
Here’s a simple three-step method to figure out your position size while keeping your risk tolerance and market conditions in check.
Step 1: Define Your Risk Tolerance
The first step is understanding how much you’re willing to lose on a single trade without it affecting your financial stability or peace of mind. This is your risk tolerance. A widely used rule of thumb is to risk no more than 2% of your trading capital on any given trade [External]. For instance, if you have a $50,000 account, you’d risk a maximum of $1,000 per trade. However, this percentage isn’t set in stone. Beginners might prefer to stick with 0.5% to 1% until they feel more confident, while experienced traders may go up to 2–3%. The key is to pick a percentage you can stick to consistently, even when the market gets volatile.
Step 2: Determine Risk Per Unit
Once you’ve established your risk tolerance, the next step is to calculate how much you’re risking on each share or contract. This is done by subtracting your stop-loss price from your entry price:
Risk per unit = Entry price – Stop-loss price
For example, if you’re buying Apple stock at $180 per share and set a stop-loss at $175, your risk per share is $5. This step is critical because it defines where you’ll exit the trade if the market moves against you. When setting stop-loss levels, consider technical indicators or market volatility. If you’re trading options, the premium paid per contract serves as your risk per unit.
Step 3: Calculate Your Position Size
Now, divide your maximum risk per trade by your risk per unit to determine the number of shares or contracts you should trade:
Position size = Maximum risk per trade ÷ Risk per unit
Let’s break it down with an example: If your maximum risk is $1,000 and your risk per share is $5, you can buy 200 shares. This ensures that if the stock hits your stop-loss, your loss will be limited to $1,000.
Another example: If you’re trading Tesla at $250 per share with a $10 risk per share and a $1,000 maximum risk, your position size would be 100 shares. This keeps your potential loss at $1,000 if the trade doesn’t go your way.
Remember, a tighter stop-loss means a smaller position size, while a wider stop-loss allows for a larger position – both staying within your risk limits. For help finding levels, browse LuxAlgo’s Fibonacci Trailing Stop or Market Structure Trailing Stop.
Using LuxAlgo Tools for Better Position Sizing
When it comes to refining your trading strategy, having reliable, data-driven tools can make all the difference. LuxAlgo provides TradingView toolkits and an AI Backtesting platform designed to enhance your entry and exit decisions, ensuring your position sizing strategy is both precise and well-informed.
Finding Entry and Exit Points with LuxAlgo Indicators
Getting your position sizing right starts with accurate entry and exit points. LuxAlgo’s Price Action Concepts (PAC) and Signals & Overlays (S&O) toolkits provide actionable insights to guide your decisions.
For example, the Internal Pivot Pattern and Internal Candle Strength indicators help locate pivots and assess candle strength, supporting tighter stop-losses at critical moments. Browse related tools in the Indicator Library and trend tools like Trend Starter and Trend Starter. For exit logic, explore Trend Starter or this trend resource, and study Oscillator Matrix for confluence and market structure.
Testing Position Sizing Strategies with LuxAlgo’s AI Backtesting Assistant
Once you've identified clear entry and exit signals, it’s essential to test your approach against historical data. LuxAlgo’s AI Backtesting Assistant lets you do just that, offering access to millions of unique strategies. You can try out different position sizing methods across various timeframes to match your trading style .
By inputting your position sizing method into the platform, you can analyze past performance and make adjustments based on historical trends. The Ultimate plan, priced at $59.99 per month (or about $30.00/month when billed annually at $359.94), provides full access to this AI-powered platform. This allows traders to optimize strategies using robust data instead of relying solely on gut instincts. Explore Backtesters and Screeners to complement your research.
Tracking Market Volatility with Oscillator Matrix
Market volatility plays a key role in determining position sizes. LuxAlgo’s Oscillator Matrix offers a comprehensive way to monitor trends and reversals. Its Smart Money Flow component tracks liquidity to reveal current conditions [External].
The Hyper Wave Oscillator identifies trends and divergences, while Confluence Zones highlight areas of market consensus. Pair with Liquidation Estimates (Real-Time) to gauge liquidity-driven volatility.
Position Sizing Mistakes to Avoid and Best Practices
Even with the best tools and strategies, traders often make mistakes that can undermine their position sizing efforts. Recognizing these pitfalls and sticking to disciplined practices is essential for protecting your account and achieving consistent results.
Avoiding Overleveraging and Emotional Trading Decisions
Overleveraging is one of the fastest ways to put your account at risk. When you use excessive leverage, any small market move against your position can lead to outsized losses. Combine this with emotional trading – where fear or greed takes over – and you’ve got a recipe for disaster. For instance, some traders double down on losing trades, hoping to recover their losses, or increase position sizes after a winning streak, assuming they’ve found a “can’t-lose” strategy.
The key to avoiding these traps is strict risk management. Stick to the 1–2% rule: never risk more than 1–2% of your account on a single trade. If you’re trading with a $100,000 account and follow the 2% rule, your maximum risk per trade is $2,000. This approach ensures that even a string of losses won’t significantly drain your account [External].
Emotional control is just as important. Treat each trade as part of a larger strategy, not as an isolated event. Use stop‑loss orders to enforce discipline and protect yourself from impulsive decisions. These predefined exit points help you stick to your plan, even when emotions might push you to act otherwise.
Setting Stop-Losses and Risk Limits
Every trade needs a clear exit plan, and stop-loss orders are your safety net. These orders automatically close your position if the market moves beyond your acceptable loss level. For example, if you buy a stock at $50 and set a stop-loss at $48, your risk per share is $2. With a $1,000 risk limit (1% of a $100,000 account), you could purchase up to 500 shares.
To improve your odds of profitability, aim for a risk-reward ratio of at least 1:2. This means risking $1 to potentially make $2 – a strategy that can help you stay ahead over the long term. You can also use trailing stop indicators to lock in gains as prices move in your favor. Additionally, setting daily loss limits can prevent you from overtrading or making rash decisions after a losing streak.
Reviewing and Updating Your Position Sizing Strategy
A position sizing strategy isn’t static – it should evolve as your account balance and market conditions change. A strategy that works in calm markets might fail during periods of high volatility.
Adjusting your position size based on volatility is critical. During uncertain times, scaling back exposure can help preserve capital. Tools like ATR are useful for measuring volatility and adjusting trades accordingly. Consider monitoring trend tools such as Market Structure Oscillator or Opening Range with Breakouts & Targets for objective signals.
Tracking your performance is just as important as adjusting your strategy. Keep a trading journal to monitor your position sizing decisions and outcomes. Over time, analyze metrics like your profit‑to‑loss ratio, capital preservation, and overall strategy performance. For systematic signals and confluence, consult Oscillator Matrix Confluence.
Incorporate your risk tolerance, stop-loss levels, and profit targets into every trade. If you hit your total risk limit, take a step back and reassess the market before initiating new positions. Regular reviews – weekly or monthly – can help you identify patterns and refine your approach based on actual results.
Lastly, true diversification means spreading risk across uncorrelated assets. Be cautious of thinking you’re diversified if all your positions are tied to the same market factors. Diversification is only effective when it genuinely reduces your overall exposure to risk (overview).
Conclusion: Building Consistent Trading Results Through Proper Position Sizing
After diving into the key methods and tools, one thing stands out: position sizing is the cornerstone of effective risk management.
It’s what separates traders who thrive over the long haul from those who face devastating losses. The line between sustained success and account wipeouts often boils down to how you handle risk on every trade.
By managing risk with discipline – such as limiting exposure to 1–2% per trade – a $10,000 account can weather multiple losses without compromising its core capital. In contrast, risking 20% per trade could empty the account after just a few bad moves. This safety‑first approach is what keeps you in the game when inevitable drawdowns occur.
Position sizing also helps remove emotional decision‑making, keeping your strategy grounded in logic. LuxAlgo’s AI Backtesting and toolkit indicators like Oscillator Matrix provide data‑based insights to refine your approach.
The key to long‑term success isn’t about hitting it big on every trade – it’s about consistency. Professional traders who stick to strict position sizing rules tend to outperform those who rely on gut feelings or arbitrary decisions. The goal is to stay in the game long enough for your edge to work across hundreds of trades.
To build a lasting trading strategy, treat position sizing as a dynamic process. Adjust and refine your approach as market conditions shift. When you want to test ideas rapidly, use LuxAlgo’s AI Backtesting updates and documentation.
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