The seventh component of your system is your position sizing algorithm. Position sizing is that part of your system that controls how much you trade. It determines how many shares of stock should you buy. A general recommendation would be to continually risk 1% of your portfolio. Thus, if you have a 250. Let’s say you wanted to buy a stock at 7.50 you would exit your position. Since your stop is your risk per share, you would divide that 250 to determine the number of shares to purchase. Since 250 100 times, you would purchase 100 shares of stock. Notice that you would be buying 10.00 each) or four times your risk of $250. This makes sense since your stop is 25% of the purchase price. Thus, your risk would be 25% of your total investment.