Free lessons › Penny Stock Mastery › Risk in Small Caps
Sizing for volatility, spreads & slippage
Position size, liquidity limits and hard stops built for fast stocks.
12 min · Intermediate
What you'll learn
- Calculate position size from the stop, then adjust it for spread and slippage
- Apply a liquidity cap and a halt cap and take the smallest resulting size
- Choose stop-order types and know when they can fail
Key takeaways
- Size from the stop, then adjust for friction, liquidity and halt risk, and take the smallest result.
- Spread and slippage belong inside your risk per share, not outside it.
- A thin stock cannot carry your full risk; take smaller size or pass.
- Stop orders are not guaranteed fills; gaps, halts and order types can all break them.
Glossary
- Friction — The combined cost of the spread and slippage per share, added to the stop distance to get real risk.
- Liquidity cap — A limit on position size based on how many shares typically trade near your entry, so you can exit without moving the price.
- Stop-market order — An order that becomes a market order when the stop price trades; it seeks an exit but does not guarantee the price.
- Stop-limit order — An order that becomes a limit order when the stop price trades; it protects the price but may not fill.
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