Entry Price - Stop Out Price = Risk Amount
Dollars You're Comfortable Risking / Risk Amount = Position Size
Example:
Entry Price = $10.00
Stop Out Price = $9.50
Dollars You're Comfortable Risking in the Trade (for example) = $100.00
$10.00 - $9.50 = $0.50
$100.00 / $0.50 = 200 Share Position Size
If you buy in at $10.00 and are risking $100.00 in the trade, the appropriate size of your position is 200 shares.
