Position Size from Cash Risk, Not Conviction
Why conviction language clouds sizing, and how to derive share count from a fixed cash risk and a measured stop distance.
Conviction is a feeling. Cash risk is a number. Mixing them produces oversized trades on familiar names and undersized trades on unfamiliar ones—often the opposite of what the chart deserves.
Fix the cash you will lose if the stop hits. Measure the distance from entry to stop in price terms. Divide. That is the maximum share count. If the resulting size feels too small to bother with, the stop is too far or the idea is too weak.
In mentoring sessions we often rewrite plans where the trader sized first and placed the stop afterward. Reversing that order changes which charts survive the filter.
Hong Kong lot sizes add a practical constraint. Round down to the nearest board lot rather than stretching the stop to fit a preferred share count.