Jul 24

Written by: Peter Mathers
24/07/2008

Position size of a trade

Keeping it simple – the “2% rule”
Only risk 2% of your total capital per trade! Some say that’s too much and others say that’s too little.(if you would like more info on the 2% rule and leverage please email me) 2% is a so so starting point for risk if you are having 50% success with your trades, if not use 0.05% - 1.00%
Quick example
Account Size: 10,000
Stock Trading at $2.20
Stop Loss at 1.95
The difference equals risk = $0.25 cents
Risk 2% of Total Acct: 10,000
Equals = $200.00
$200.00 divide $0.25 = 800 shares
Total Risk $200.00
A good starting account size is 20,000 this way your percentage risk can be smaller i.e. 1% of total capital per trade. So the smaller the account size the more at risk you are.
Money management is the number one rule, it comes first!
Scaling into trades is dividing your percentage risk into 3 or 4 positions.
The best advice is to under trade under trade.

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