Win Rate – Target Price – Stop Price – will give you expected return based on position size. This allows you to size your trades based on your daily or monthly goals. Simple.

If your goal is to make $2,000 a day, and you make 20 trades a day on average with a win rate of 80%, all stats that you can find in Tradervue, you can do the following:

On a $50 stock, you see support is at $48.50, so you have your stop (mental or hard) there, willing to take a $1.50 loss. Your target is at $50.75, so how many shares? The answer = 334, which a simple excel equation can do.

Why? If your win rate is 80%, and you did the same risk-reward as above, you would need 334 shares – (334 * .75 cents for the winners = $250.5, 334 * 1.50 for the losers = $501, because if you did this trade 20 times, on average you would win 16 times (80% win rate) which is $250.5 * 16 = $4,008 and you lost 4 times which is $501 * 4 = $2,004), your total at the end of the day would be $4,008 – $2004 = $2,004, which is pretty much your goal of $2K.

The higher the win rate or smaller the risk or higher the target, and the lower the number of shares needed. If that represents too many shares for you, then you need to either raise your win percentage, or reduce your daily goal. Here is a good reference for people who have questions on positioning sizing:

Day Traders Guide on Position Sizing from Daytrading

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