POSITION SIZING EXAMPLE

1. Calculate Your Maximum Dollar Risk

Your plan is to risk a maximum of 5% of your $200 capital on this single trade.

• Max Risk: $200(Capital)\ast 0.05(5$10**

This means the most you are willing to lose on this trade is $10.

2. Calculate the Risk per Share

This is the distance between your entry price and your stop-loss price.

• Entry Price: 714.70

• Stop-Loss Price: 689.59

• Risk per Share: 714.70 - 689.59 = $25.11

Each share you buy has a potential risk of $25.11.

3. Calculate Your Position Size (Number of Shares)

Now, we divide your maximum dollar risk by the risk per share to find out how many shares you can buy.

• Calculation: $10(MaxRisk)/$25.11 (Risk per Share) = 0.398 shares

Conclusion:

With a $200 account and a 5% risk limit, you can buy approximately 0.40 shares of LLY with this specific trade setup.

Since you likely can’t buy a full share, this tells you one of two things:

1. Your trading capital ($200) is too small for a stock this expensive with such a wide stop-loss.

2. You would need a broker that allows you to trade fractional shares to take this trade.

It’s also worth noting that the Risk/Reward ratio for your plan is (754.80 - 714.70) / (714.70 - 689.59) = 40.10 / 25.11 = 1.6:1. This meets the “>1.5:1” criteria in your plan, so the trade structure itself is sound!