Position sizing means determining "How much quantity to buy?".
Those who do not answer this question before entering into a trade can end up buying too much which can make an adverse impact on their capital if the trade goes wrong. There can be many examples of how traders blow up their accounts by not following position-sizing basics, but let's cut them out.
Here is a simple calculator to compute your ideal position size:
How to Use the Calculator
Inputs
Input your total trading capital.
Input percentage of capital that you are willing to put on each trade. If you do not want any such restriction, put 100%.
Input the maximum loss as a percentage of the total capital that you are willing to risk on each trade. Ideally, it should never be more than 1%. Lower the better.
Input the planned BUY and Stop Loss price.
Results
The calculator will give you the maximum acceptable loss per trade, in value and percentage terms.
The position size will be the lower of (i) maximum capital per trade as % to total capital; and (ii) maximum capital on the basis of acceptable stop loss per trade.
The number of shares (rounded off) that you should consider buying will be shown at the end of the calculator.
I use the Pro-Setups script for my swing-trading. If you also want to try it, please check it out by clicking here.
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