Calculating Your Position Sizing

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How do you calculate the right size trade?

After setting your initial stop, you need a method for calculating your position sizing so you never risk more than your predefined maximum loss. There is a simple formula for calculating this:

maximum loss / initial stop size = number of units to purchase.

A basic but very powerful equation!

Of course theres more to setting excellent position sizing. To find out more visit: http://www.trading-secrets-revealed.com

Category:

Education

Tags:

• position sizing
• stock trading strategies
• money management
• trading money management
• risk money management

[demysaid]

Hi,

I understand this based on a single trade but how does it work when going into multiple positions? When I place trade 1 based on the formula and then I want to place trade 2, do I base it off of the now available cash to trade? And if using the 2% rule (for loss), how does that work with a Margin account?

Thanks