A trader sees support at ₱48.20 and plans an entry near ₱50.00. If a close below support invalidates the idea, the relevant chart distance is ₱1.80 plus any stated allowance for execution. The account must now answer a separate question: how many shares can be held while keeping the chosen loss within bounds?
The backward habit
Many orders begin with a familiar quantity—100 shares, one contract, one standard lot. The stop is then squeezed until the possible loss looks acceptable. Price structure has been forced to fit the quantity. Normal movement may trigger the stop even though the original thesis has not failed.
The opposite error keeps a technically sensible stop but ignores its peso consequence. A wide stop and habitual size can expose several times the intended account risk.
A clean calculation
Suppose the trader allows ₱900 of account risk. Before fees and slippage, dividing ₱900 by ₱1.80 gives 500 shares. If realistic costs require a ₱2.00 risk allowance per share, size falls to 450.
This is an example, not a recommendation. Instrument value, minimum lot, currency conversion, leverage, gaps, and brokerage rules can alter the arithmetic. The core sequence remains:
- State the entry condition.
- Mark where the chart thesis fails.
- Measure entry-to-stop risk.
- Choose account risk under a personal plan.
- Derive size and round down where required.
When the result is too small
A tiny calculated position is information. It may mean volatility is elevated, the stop is distant, or the account-risk allowance is modest. Moving the stop closer merely to obtain more size changes the chart thesis. The valid choices include taking the smaller position or passing.
Write the calculation beside the chart before entry. That small act makes later review possible without trusting memory.
Training note: This article is educational and does not recommend a security, derivative, or trade.
Practise this in training