Originally Posted by
grems8544
I think Van Tharp's analysis of position sizing is the best treatment that I've seen anywhere in the investment/trading world. I generally follow his methodology with the GDX and IWM trades.
So let me give an example of my latest GDX trade:
One of my accounts is $47,734 in size.
2% of this is $955 -- my maximum risk per position for this account.
GDX entry for me was at $47.11 -- I bought about 5 minutes before the open using a limit order.
The recommended Stop Loss for GDX was -6.38%, which is $44.10
$955 / 0.0638 = $14,968 position size
$14,968 / $47.11 = 317 shares
The position is up $375 as I write, or in Van Tharp's parlance, 375/955 -->.39"R", which is his method of quantifying amount risked to amount won.
Hopefully this helps.
Regards,
pgd