How to decide tread size
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Trade size directly related to your psychology that controls your emotion factor, and if you take any decision under the influence of emotion factor there are more chance to lose money instead of make money.
This is a very interesting issue. First you need to decide how much you can bare a loss!!!!, that way you know your risk factor.
To decide trade size
1) Decide how much money you like to lose incase market goes against you. Say $A
2) Decide stop loss level Say $P
3) What price you want to enter Say $Q
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Your trade picture become clear
Trade size = A / (Q-P)
Decide your stop loss means at what level you want to exit in case your trade in wrong direction. Now difference between buying price and stop loss give you idea about how many stocks you can buy with your risk tolerance.
It is the best idea to stay in your lose capability that way you not take any wrong decision due to emotion and psychological factor. Successful trading strategy you can’t ignore this factor. In the stock market there is very little chance your all trade goes straight and other thing market never moving in straight line, there are up and down throughout the day, so trade size is very very important factor to control emotional factor.
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