Rules of thumb like 'never risk more than five percent of your portfolio' are fine, but may leave you in the dust on fast moving days. You'll need to have done some trades before, and have the stats to hand ( the proportion of your winners to losers, and the dimensions of those winners and losers ). We could say that 'WP' means 'Winning Percentage' and 'WL' means 'Historical Average Win Size divided by Historical Average Loss Size'. Put simply, if your win / loss proportion is consistent, you may maximise your returns by only risking about fifty percent of your equity on each trade.
Don't hold stocks at least a couple of days either side of takings news. I have experienced declines of 30-50% in some days by holding my covered call stocks over revenues news. So as you can see, the formula adjusts as your proportion of winners to losers changes, and also as the size of your winners and loser changes.
Just remember that you need to NEVER trade with cash you are not prepared to lose.
Trader Jack likes to pen for trading stocks - the free stock trading site from traders Initiative helping traders get to standard speed fast.
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