Position Sizing & Share Quantity: How Many Shares to Buy in a Stock?
★ SUMMARY ★
In this week’s episode what I’d really like to do is share with you some insight about Share Quantities, Share Size and Position Sizing.
I’m not going to detail in as much detail as I do in my create your stock trading system course about this trade size but I want to share with you some insight just about position sizing, how I go about it, how I approach it and just some things to think about.
The reason I want to give you just some things to think about is because everybody’s account size is different, everybody’s style is different, so your trading account size might be larger than this one person, or might be smaller than someone else’s.
Your risk tolerance could be a lot different than someone else’s you might have a higher risk tolerance than me or this person or that person. I can’t really just throw numbers out here and say this is exactly what you should do and this is how many shares you should trade.
Instead, once we go through this example, just think about it in terms of relative’s sake and how it would apply to you because everybody is different and I just personally don’t know you, your experience, your trading habits, your style and your account size.
You’ll have to make these adjustments and adapt based on what we discussed. In order to look at share quantities and share amounts that you should be getting, remember that there are different kinds of stocks out there.
There’s the Low Dollar stocks and then there’s the Higher Dollar stocks. Typically you’ll be able to trade a lot more shares in the lower dollar stock and a lot less shares in the higher dollar stock and that is just because of your affordability or your account.
For this example, I’m just going to assume to make matters easy, I’m going to assume you have a 10,000 dollar account and this would just help make numbers and things to work with a lot easier.
As we get into trading, you have to look at your own personal experience and your risk tolerance as you get into the share counts because with a low dollar stock, you’ll be able to trade many more shares.
While with the high dollar stock you’ll be able to trade a lot fewer shares. So how many shares should you really trade?
Well I think it also comes down to experience, the trade, liquidity and everything else that’s going on around you. So if you’re just getting started, if you’re brand new to the markets then you probably want to trade less.
If on a low dollar stock, you normally trade or thinking about trading or saying you can afford so many shares, let’s just say you can afford, let’s say 2,500 shares, you can normally afford on a low dollar stock and let’s say on a higher dollar stock you can afford let’s just say about 500 shares.
Posted at: http://tradersfly.com/2016/04/position-sizing-share-quantity/
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