Percentage Vs Dollar

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Disclaimer: What I'm about to write is entirely just my personal opinion and I'm not a professional financial adviser. I don't assume the responsibility of your losses if you do decide to follow my advice.
So, lately I have been getting some questions from a member in the discord room chat asking about how to determine their stop loss and how to calculate a 3:1 ratio. 'I have problems doing the math in my head when it comes to the 3:1 and where I should set my stop loss. I plan to set it at 1% from where I took my position or cash out at 3%. How do you guys do the math so quickly and do I need a calculator right by my desk?'
Personally I always get a lil chuckle when I read something like this. I realize that a lot of the members on this page have came from some other trading page on FB and their head mod and founder(not to be named) there have always used the word 'percentage' in his/her educational material. I'll tell you this bluntly straight up. I'm not saying that he/she is wrong, but I always fell asleep watching those vids. I'm a high school drop out. I'm not that great at math. While I do understand the power of compounding interest, I rather use something a lil bit more realistic. Let me ask you this: When you go to the store and buy groceries, do you pay in percentages or dollars? What would you like to make coming to work in the market today? Money or percentage?
Moving along, what is a stop loss: A stop loss is an emergency plan to exit a trade if the stock price movement is going against your trading PLAN. A stop loss is also a defined risk that you have ACCEPTED and WILLING to take in order to find out if your trading hypothesis/experiment is correct.
To me, this is NOT A PERCENTAGE! This is the amount of money I'm willing to lose in a single given trade in order to test and see if I could make 3 times the money with it. Everyone has a different risk tolerance. I personally am comfortable losing $50 every trade in order to have a chance to make $150, so my stop loss is $50. If I set my stop loss at 10c, that means I could take a trade of maximum 500 share size. I would then take my profits at a gain of 30c in my favor. Simple fast easy math.
A lot off my trades I usually have a defined spot on the chart where I set my stop loss at. It's usually a previous significant higher low if I'm long, or a previous significant lower high if I'm short. I will then try to take a trade as close to that point as possible to minimize my risk. It's usually 20-25c away. With that said, since my average trading risk is usually 20-25c away, I stick mostly with 200 shares max. And I always aim to gain for 3 times my money. 60-75c.
Although I must say, 3:1 is basically a minimum for me. A majority of my winning trades usually comes out to 5:1 or even as good as 10:1
I remember my very first point and a half take was shorting EFX Equifax when their stock was tanking due to them releasing in the news that their website had been hacked. I took 25 shares and shorted it. I rode it out for a point and a half and took it off. That thing continued to crash for another 2 points!
So, find out how much you are willing to risk per trade in dollar wise, be it $20/50/100/200. What ever the amount that doesn't make you squirm in your chair and doesn't make your heart race. That you are comfortable with so that you can concentrate solely on what the chart information is telling you and trade with a clear mind. That is how I would approach on how to calculate and set my stop loss and target quickly without a genius mathematical mind or a calculator.
If you have any questions about THIS topic of stop loss and 3:1 ratio, please don't hesitate to ask them in the comment section and I'll try to the best of my ability to answer them.
Nov 21st 2016
Matrix

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