Hey Mayur! Thank you for the question. I am not sure exactly what you are asking but let me explain. I think you are thinking about it in the wrong way. I will explain, but if you are looking to get a formula, I have created the position sizing indicator (FREE) for my readers:
Stop loss = 6% from Position size, 6% from $25k = $1,500
You mention at the beginning 1% Position size. This is very very little and very limiting. The methodology that I use and the methodology that has been taught by the Market Wizards is that you need to concentrate in the big winners. If you have 1% Position size thisi is too low.
However, what I think you are confusing is Risk to Total Equity with Position Size. The Risk to Total Equity (ROTE) is how much of the Account size ($100k) are you risking in the trade. When you have a Full position size ($25k) and Stop Loss of 6% ($1,500), your ROTE is $1,500/100.000 = 1.5%.
So if you follow the methodology described in my articles, you would buy $25k worth of XYZ Inc stock. This is 89 shares (25k/280). Your SL is (let's assume) 6% (read article on how to determine stop loss in my newsletter - https://tintintrading.substack.com/p/how-to-open-a-trade-workflow). 6%. * 280 price per share * 89 shares = $1,500, which is 1.5% ROTE.
What we are addressing in the article is how to change the Position size (25%) based on the way your recent trading has been going on. So instead of risking 1.5% ROTE decrease the risk until things work your way.
If you have more questions or want to chat make sure to connect to my discord.
Oh, I think I get it now. Will then it be okay to say that we're virtually taking $25k out of main account and allocating it for this one particular trade for its entire duration, and as the trade is closed, those $25k plus/minus whatever, is then released and virtually added back to main account.
A follow up question though, If I've invested $25k out of total $100k, then I cannot take another trade until and unless this one is closed, unless of course I'm willing to increase my exposure above 25% Is this a sound interpretation?
With portfolio of $100,000 and Exposure $25,000 and Position Size(1%) $1,000 and stoploss(6%) $60, let's say there is an opportunity, XYZ Inc is trading at 280 and and SL at 275, with 6%($60) Risk/Stop-loss, I can buy about 12 shares, but to buy 12 shares I will be needing about 280x12=$3360. My Position size of (1%) $1000 doesn't allow to spend $3360? What to do in this case??? Also it's just one trade there are 4 more in line.
All this is based on my understanding, let me know if I'm wrong, in that case what's the correct interpretation of all this??
In short, I'm trying to figure out a formula to calculate the number of shares I can buy in any one particular trade.
Hey Mayur! Thank you for the question. I am not sure exactly what you are asking but let me explain. I think you are thinking about it in the wrong way. I will explain, but if you are looking to get a formula, I have created the position sizing indicator (FREE) for my readers:
https://www.tradingview.com/script/CzuirQGx-TTI-Position-Sizing-Calculator/
So I explain.
Account Size = $100k
Full position size = $25k
Stop loss = 6% from Position size, 6% from $25k = $1,500
You mention at the beginning 1% Position size. This is very very little and very limiting. The methodology that I use and the methodology that has been taught by the Market Wizards is that you need to concentrate in the big winners. If you have 1% Position size thisi is too low.
However, what I think you are confusing is Risk to Total Equity with Position Size. The Risk to Total Equity (ROTE) is how much of the Account size ($100k) are you risking in the trade. When you have a Full position size ($25k) and Stop Loss of 6% ($1,500), your ROTE is $1,500/100.000 = 1.5%.
So if you follow the methodology described in my articles, you would buy $25k worth of XYZ Inc stock. This is 89 shares (25k/280). Your SL is (let's assume) 6% (read article on how to determine stop loss in my newsletter - https://tintintrading.substack.com/p/how-to-open-a-trade-workflow). 6%. * 280 price per share * 89 shares = $1,500, which is 1.5% ROTE.
What we are addressing in the article is how to change the Position size (25%) based on the way your recent trading has been going on. So instead of risking 1.5% ROTE decrease the risk until things work your way.
If you have more questions or want to chat make sure to connect to my discord.
Oh, I think I get it now. Will then it be okay to say that we're virtually taking $25k out of main account and allocating it for this one particular trade for its entire duration, and as the trade is closed, those $25k plus/minus whatever, is then released and virtually added back to main account.
A follow up question though, If I've invested $25k out of total $100k, then I cannot take another trade until and unless this one is closed, unless of course I'm willing to increase my exposure above 25% Is this a sound interpretation?
Great job, can you share the excel file?
saeed-909-07@hotmail.com
Hi so am I. Could you please give me the excel file
khhatab85@gmail.com
very nicely explained. I would like to play with the excel if you can share with me please. my email id is jjtrambadia1@gmail.com
Thank you
Great explanation and very helpful.
May I ask if you have an excel sheet template for portfolio tracking and trading journaling?
Hey Hassan - if you share your email I can share the excel from the examples if you want to play with it.
Hi, here is my email, hadab20@gmail.com
Thank you
Hi so am I. Could you please give me the excel file
khhatab85@gmail.com
With portfolio of $100,000 and Exposure $25,000 and Position Size(1%) $1,000 and stoploss(6%) $60, let's say there is an opportunity, XYZ Inc is trading at 280 and and SL at 275, with 6%($60) Risk/Stop-loss, I can buy about 12 shares, but to buy 12 shares I will be needing about 280x12=$3360. My Position size of (1%) $1000 doesn't allow to spend $3360? What to do in this case??? Also it's just one trade there are 4 more in line.
All this is based on my understanding, let me know if I'm wrong, in that case what's the correct interpretation of all this??
In short, I'm trying to figure out a formula to calculate the number of shares I can buy in any one particular trade.
Thank you so much for your sharing.
Could you please share the excel file?
beastboy2303@gmail.com