How much position size per trade?

[popoh08 0]

Sorry.

I'm a beginner at English.

But I can read English a little well.

 

My total asset is $850,000.

I deposit $450,000 in my broker account.

 

I read Andrew's book 3times.

Its very helpfull.

I started to day trade.

 

I take position $150000 - $20000 per trade.

risk is $200.

reward is $500 - $600.

 

I've got average +$500/day  in one week.

Lucky!! 

Is it lucky?

 

I worry about getting big losses sometime.

 

my worry thing is that  I always take large position at $20,000. (my asset is $85,000)

      for example, I trade like AXON choppy move stock,. suddenly price move up and down, I could have got big losses $2000-$4000.

It is very  fearful.

 

You guys, How much spend your cash per trade?

and How much you take position to asset ?

(↑ your position to asset ratio)

I spend $20000 per trade.

my asset is $850000.

It is $20000/$850000 = 0.235.

 

 

 

 

 

[Aiman 86]

I'm not an expert, but let me tell you what would I have done.

My size wouldn't depend on the money I have, it'll be depending on the stock I'm trading.

Let's say I'm trading a stock which costs 2 dollars, with my own(20.000$) I can buy 10 thousand shares, but look at the problem, if the trade goes against you, 10 cents move down means you're -1000$ of your capital, that means you lose 5% of your account in 1 trade! You shouldn't risk more than 1 or 2% of your account per day, if your account money is 20,000$ the 1% of your account is 200$, the 2 is 400$, now adjust the size depending to the maximum loss you're allowed to take. You'll be allowed to buy only 4000 shares maximum(8000$) if your risk is 10 cents, but don't forget you're not allowed to choose your stop losses by your self, let's say you got a bad entry, your stop loss is 30 cents below your entry point, your profit is 60 cents, 2:1 risk to reward which is good, but what size will you take here? 1300 shares maximum I believe, if it goes down 30 cents you get stopped out and lose 390$, and stop trading for the day:)

If the price of the stock is more expensive, let's say now 20$ per share, when the risk is 10 cents, you'll be allowed to buy 4000 shares(80000$) you use margin here, if it goes 10 cents below it you sell everything and end up losing 400$, if stop loss is 30 cents below you, u take 1300 shares, same as above. Anyway. As I said it depends on your capital, and the price of the stock, and the risk you allow yourself in the trade:) One with 3000$ with 2$ stock will be allowed to risk 60$, therefore, he's allowed to buy only 600 shares(1200$) if it goes against him 10 cents, he hit his maximum loss, 

I want to add one thing more, you don't have to risk you maximum loss per day on one trade! Better divide your money so that you can take multiple trades in case you lose your first trade, this way on the first trade you'll take only 1000 shares, your stop loss(technical level) 10 cents below your entry point, you lose the trade and end up -100$, you're still allowed to lose 300$ today, So you can take 3 more trades.

Many people make a paper sheet in front of them, there written the price of the stock, if the risk 10 cents they're allowed to take x shares, if the risk 15 then they're allowed to take x  shares, and so on, so that they don't have to think and calculate it during the trade, it's a waste of time, until you get used to it.

I think I was able to make it shorter... Anyway, hope this helps you))

[Robert H 455]

Andrew recommends risking no more than 1% of your account equity (not buying power) on one single trade. Since your account is quite large ($450,000), that would mean $4,500. That is a maximum; you are free to risk less. Don't consider assets outside of your brokerage account (i,e the total $850,000) since this capital is not being allocated for your day trading business.

Consider a stock trading at $50 and your stop loss--at a technical level--is $1 away. The calculation is $5,000/$1 = 5,000 shares. Take the $50 stock price multiplied by 5,000 shares, and your position is worth $250,000. That is a lot of money on the line and the psychology/emotions of trading don't scale up linearly. Remember, you are free to risk less than 1% on any trade.

Back to the example. If you are risking $1/share on the trade, that means your potential profit should be at least $2/share. Look to return $10,000 profit on the trade for a risk/reward of 2.0.

Daily maximum loss is based on personal preference and risk tolerance. Some people stop at -2% of account; others at -4% of account. Some stop after 3 losing trades, etc. etc.