How many shares do you buy?
How many shares of Coca-Cola do you buy in such a way you only lose 1% of your trading capital?
Before we can answer that question, we have to ask ourselves where is our entry point and stop loss price…
Stop loss: $45
With that in mind, just pull out your position sizing calculator…
Let's say you have a capital of $100,000.
Just fill in the blanks as demonstrated in the previous lesson and in this case…
You can buy 500 shares of Coca-Cola.
If the price hits your $45 stop loss, you will lose not more than $1000 which is 1% of your trading account.
So this is how you kind of piece the puzzles together.
One aspect that I've not really covered is your exits.
Where do you exit your trade?
This is a very broad topic, but generally, if you're a swing trader and you just want to capture one swing in the market…
What you want to do is to exit your trade where there is a potential selling pressure or where sellers could come in and push the price lower.
And if you look at the Coca-Cola chart, there could be a potential selling pressure at this level…
This is how you can go about exiting your trades.
Of course, this is just one approach from a swing trading perspective.
You can adopt a trend following approach as well where you try to ride trends in the market.
But again, it's not within the scope of this lesson to cover it.
With that said let's move on to the next lesson…