 Hi everyone, this is Paul Lang for the Stock Swish and I'm here to discuss the topic of share sizing, leverage, money management. We get questions frequently from people who are looking to trade that don't understand how traders make the money they do because they have an investor mentality. And also we get questions frequently from traders who have begun trading and don't understand some of the key components about share sizing that can be a very costly mistake if you don't understand these issues. So let's begin with a very simple basic concept, the maximum shares that you'd be allowed to buy. Your account size determines this as well as the type of account that you open. A typical retail account you get would have four times buying power. It means whatever cash you put in you'd be allowed to control or purchase or short four times that value in stock. A proprietary trading account could be ten times the buying power or more depending upon the deal that you get with the individual proprietary trading firm. So in other words, in a retail account if you deposit $50,000 you would be able to purchase or control $200,000 worth of stock at one time. In a prop count or a proprietary trading account if you deposit $50,000 you'd be able to control up to $500,000 or even more. The second component is not how much could you buy or control but how much should you based on what you're about to do. We buy shares as a trader based on a fixed risk concept meaning that if the play stops out you lose a predetermined amount. What does it mean to stop out? Well whenever we take a play as a day trader we're using a chart as a guide and there is a spot on the chart that will determine what the play is that we're doing, where we enter and where the play would no longer be working. That is where we would stop out of the play. If we stop out of a play we buy share size so that that amount will be a fixed risk. For example if we're risking $300 and you buy a $20 stock and determine that it should not drop more than 30 cents or I will get out then I'd be allowed to buy 1,000 shares because 1,000 shares times 30 cents equals $300. Traditional investor thinking says that if you buy 1,000 shares of a $20 stock you have an investment of $20,000. As the stock goes up $2 over that year you make 10% for the year and this would be considered a good investment. Most investors risk is undetermined or fuzzy at best meaning they usually don't have a plan of when to get out if the play does not work. We've seen this very evident during major market corrections that investors oftentimes get out with large losses they didn't originally plan on. Trader thinking says you buy 1,000 shares of a $20 stock and your investment is $5,000 or even less depending upon if you have 4 to 1 or 10 to 1 leverage. The stock goes up a dollar that day you make $1,000 that day and you've limited your risk to $300. Now you may be saying I just assumed a stock would go up $2 in a year and I'm assuming it will go up a dollar in a day. This is very true though. We see this happen every single day. Every day we are watching stocks that have 10% or much bigger moves in the course of just one morning. Well a stock may move 10% by the end of the year if you look at the chart that is comprised of many, many, many moves that go up and down large amounts and it balances out to 10% for the year or whatever number. So day trading we look to capture those fast moves and we use specific strategies to find those stocks that are going to have those quick moves every morning. As a trader you may be in a trade only 10 minutes or maybe all day. You also can go back and redo the play once you're out or to do another play again and again and again all day long if you want to. I'm not saying it's a proper thing to do but from a money perspective you would be allowed to do that. And also with the example I gave you could do 10 of those at one time theoretically because you've only used 10% of your total buying power. That is to say you've controlled $20,000 worth of stock and you had a total ability to control $200,000 or looking at the cash you put in you've used $5,000 of your $50,000. So these are the concepts about money management, about leverage and about sure sizing that we use as a trader that are often times a little difficult to understand if you have an investor mentality or if you are new to the market. If you have any questions about anything on this presentation feel free to email me. I am Paul at thestockswish.com, P-A-U-L at thestockswish.com. If you have any other questions about the Stockswish feel free to contact Melissa at thestockswish.com and if you would like to get a free trial to our trading room feel free to email info at thestockswish.com. Thank you for listening. This is Paul Lange from the Stockswish.