Position Sizing newbie question

[courtneykre]

hi guys! newbie paper trader here. I have a question and i hope someone can answer, thanks in advanced!. My question is regarding buying position sizing. after watching this video,

, at around 3:58 minutes, he discussed the formula for buying position sizing. And it thought i try it with my own paper trade

Supposed i have 100,000 in capital, my buy entry is 308.78 and my stop loss is 308.1. When i computed it, the result was 1000/0.68 = 1471 shares. 308.78 x 1471 = 454,215.38.. Why is my position larger than my capital?

 

[xtina35]

@courtneykre Medyo off topic pero try to use this para madali nalang siya icompute https://chartyourtrade.com/position-size-calculator/

 

[resjudicata]

@courtneykre It means your stop loss is too tight. Try changing it to 305.

 

[resjudicata]

Read more here: https://www.investopedia.com/terms/p/positionsizing.asp

 

[courtneykre]

@resjudicata correct me if i wrong but i think adjusting my stop loss just to conform to the position size result that the computation said is not good because my stop loss corresponds near to the support that i identified w/ relation to my target profit which is near the resistance w/ 1:2 risk/reward ratio

 

[resjudicata]

@courtneykre You're correct. This means you should search for another stock to buy.

 

[courtneykre]

@resjudicata i still wanna know the answer to my original question before i even think to buy another stock, because think about it, what if i change to another stock, and this same problem happened?

 

[resjudicata]

@courtneykre This problem wouldn't happen with small to midcaps. Original commentor is right, youre stop's way too tight for your size. Either pick another stock or add more funds before buying anything.

 

[jaymis]

@courtneykre Divide it further by 100 to get .0068 and multiply it to your position size.

E.g.

Position size=10,000
Charges= .68% or .0068

             = 10,000 x .0068
             = 68

So your position size plus the charges total 10,068.

Note, the computation is accurate for positions >8,000

Edit: I am not familiar with the math terms but here is how you do it.

 

[courtneykre]

@jaymis can you elaborate further with actual computation as to exactly how many shares I would buy if we were to use your solution?

 

[jaymis]

@courtneykre Opps, I'm sorry, I'm wrong. I was in the park when I made my comment. I thought he said that the charges amounted to .68 of your trade value.