Fixed Dollar Risk: Stock Calculator Model

Why? The Fixed Dollar Risk Money Management Model calculates the number of shares to purchase given a specified amount of money you are willing to risk.

Stock Calculation

Fixed Dollar Risk Money Management Model Formula: Number of Stocks to Purchase = $ Capital Prepared to Risk / (Stock Price - Stop Loss)

Knowing that I want to risk only $X dollar amount I divide that by the difference of the stock price and the stop loss price (which I obtained possibly from technical analysis), this will give me the number of stocks recommended to purchase using this model.

Inputs

• Stock Price
• Stop Loss Price
• Risk ($): Amount of Capital you are prepared to risk (lose)

Outputs

• Number of Stocks to Buy
• The value of Capital required

Fixed Dollar Risk Case Studies

Examples of the various calculations:
These examples exhibit the standard long trade calculation. (buy low, sell high) If you would like to calculate a short trade, simply select the "Short” button and input the relevant numbers.

• Standard Transaction (Default)
• Leveraged Standard Transaction
• Transaction with a Flat Commission Fee
• Leveraged Transaction with a Flat Commission Fee
• Transaction with Different Brokerage Fees on Buy/Sell
• Leveraged Transaction with Different Fees on Buy/Sell

Standard Transaction

INPUTS:
Model Used : Fixed Dollar Risk
Position Type : Long
Dollar Risk : $ 1,000.00
Price $ 34.56
Stop $ 33.00
Profit Target : $ 37.00

OUTPUTS:
Quantity : 641
Position Size : $ 22,152.96
Theoretical Profit : $ 1,564.04
Risk Reward Ratio: 1.5640

Leveraged Standard Transaction

INPUTS:
Model Used : Fixed Dollar Risk
Position Type : Long
Dollar Risk : $ 1,000.00
Price $ 34.56
Stop $ 33.00
Profit Target : $ 37.00
Leverage : 5 %

OUTPUTS:
Quantity : 641
Position Size : $ 1,107.65
Theoretical Profit : $ 1,564.04
Unleveraged Value: $ 22,152.96
Risk Reward Ratio: 1.5640

Transaction with a Flat Commission Fee

INPUTS:
Model Used : Fixed Dollar Risk
Position Type : Long
Dollar Risk : $ 1,000.00
Price $ 34.56
Stop $ 33.00
Profit Target : $ 37.00
Brokerage Fee $ 19.95

OUTPUTS:
Quantity : 641
Position Size : $ 22,152.96
Theoretical Profit : $ 1,564.04
Risk Reward Ratio: 1.5640
Break Even Price: $ 34.62

Leveraged Transaction with a Flat Commission Fee

INPUTS:
Model Used : Fixed Dollar Risk
Position Type : Long
Dollar Risk : $ 1,000.00
Price $ 34.56
Stop $ 33.00
Profit Target : $ 37.00
Leverage : 5 %
Brokerage Fee $ 19.95

OUTPUTS:
Quantity : 641
Position Size : $ 1,107.65
Theoretical Profit : $ 1,564.04
Unleveraged Value: $ 22,152.96
Risk Reward Ratio: 1.5640
Break Even Price: $ 34.62

Transaction with Different Brokerage Fees on Buy/Sell

INPUTS:
Model Used : Fixed Dollar Risk
Position Type : Long
Dollar Risk : $ 1,000.00
Price $ 34.56
Stop $ 33.00
Profit Target : $ 37.00
Brokerage Fee $ 19.95 / 0.1 %

OUTPUTS:
Quantity : 641
Position Size : $ 22,152.96
Theoretical Profit : $ 1,564.04
Risk Reward Ratio: 1.5640
Break Even Price: $ 34.63

Leveraged Transaction with Different Fees on Buy/Sell

INPUTS:
Model Used : Fixed Dollar Risk
Position Type : Long
Dollar Risk : $ 1,000.00
Price $ 34.56
Stop $ 33.00
Profit Target : $ 37.00
Leverage : 5 %
Brokerage Fee $ 19.95 / 0.1 %

OUTPUTS:
Quantity : 641
Position Size : $ 1,107.65
Theoretical Profit : $ 1,564.04
Unleveraged Value: $ 22,152.96
Risk Reward Ratio: 1.5640
Break Even Price: $ 34.63