Incredible Charts: Money Management: the 2 Percent Rule: "Imagine that your total share trading capital is $20,000 and your brokerage costs are fixed at $50 per trade.
Your Capital at Risk is: $20,000 * 2 percent = $400 per trade.
Deduct brokerage, on the buy and sell, and your Maximum Permissible Risk is: $400 - (2 * $50) = $300.
Calculate your Risk per Share:
If a stock is priced at $10.00 and you want to place a stop-loss at $9.50, then your risk is 50 cents per share.
Add slippage of say 25 cents and your Risk per Share increases to 75 cents per share.
The Maximum Number of Shares that you can buy is therefore:
$300 / $0.75 = 400 shares (at a cost of $4000)"
'via Blog this'
