I usually like to risk no more than 1% of my trading account on each stock trade. Let’s say that I am trading a $100,000 account. In that situation, I will risk only 1% of my account, or $1,000. If I enter the stock at 100 and the 50-day moving average is at 95, that means that my risk is 5 points on the stock (100-95). In that case, I should only buy 200 shares of stock. If I buy 200 shares of stock, and the stock falls 5 points, I will have lost $1,000 or just 1% of my total account size.
