How to Enter Your Account Balance in the Position Sizing Worksheet

When inputting your account balance, keep in mind these things:


1)  I use margin buying power as needed for my account. This means that all the position sizes are calculated assuming that you are following in my footsteps. You definitely do not need to use margin though! It's optional. If you do not want to use margin buying power, just unclick the checkbox that says "Click here if you use margin buying power." when inputting your account balance.


2)  Only input the amount you are willing to put at risk for these types of trades. As you should know by now, my approach is a high risk, high reward approach. Do not put your full account balance if you do not want to put your full account balance at risk.


3)   When you input the account balance for position sizing, the purpose of the account balance entry is not to determine how much room you have left in your account. The only purpose of entering that balance is to allow the system to compute a position size that equates to the appropriate risk level (1% for stocks and 5% for options).


So in other words, my position size calculator doesn't know how much remaining buying power you have in your account. My system isn't designed to help you manage that. The calculator is only designed to calculate how many shares would be required to get to a 1% risk level for stocks and how many contracts would be required to get a 5% risk level for options.


So if you want to mimic my position sizing approach, don't input just the "cash available" or else you're only risking 1% of your cash available for a stock trade, which is less than I risk. And also don't put your entire buying power including margin if you have it, because that's not how I calculate it.


When I say account balance, I mean the value of your account. In my trading platform, Think or Swim, it's referred to as Net Liquidating Value, which makes sense considering it's the value of my account if I sold all open positions and turned everything into cash.


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