The answer to this question depends on your portfolio size / net worth.The general rule of thumb is that you shouldn’t risk more than 2% of your money on a single trade. That way you can have 50 losing trades (in a row) before you go bust. Let’s say for example that you are trading £10K: So your maximum loss per trade is £10,000 / 50 = £200. This is your money at risk, called R by Van Tharp, author of the Definitive Guide to Position Sizing. Note that this is real risk – ie. loss of £££ – not the volatility proxy as used in business schools and economics departments. So you need to set your stop-loss so that if it is hit, you only lose R (£200).