Step 3 determine 2 percent dollar risk per trade

To determine the maximum amount of money you can withstand to lose per trade, multiply 2 percent times your capital per position. In the example, using $25,000 per position:

Maximum Dollar Risk = .02 X Capital per Position

Capital per Position = $25,000

In this example, $500 is the most you are willing to lose on a trade, given your capital allocation per position. Taking another example, if you have $100,000 to trade with and decide that you want to take two positions, then your dollar risk per trade is $1,000:

r r Number ot Positions

Risk Capital = $100,000

Number of Positions = 2

Maximum Dollar Risk = .02 X Capital per Position

Capital per Position = $50,000

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