Your position sizing should be the first thing to consider when managing risk. Some would say this is more important than "where to put my stop, or target".
This is because position sizing is an element that you have full control over.
It's also a personal thing, as everyone has a different skill level, account size and overall risk tolerance.
A person in their 30's or 40's mid career earning $100,000 a year can probably be more aggressive than say, someone who is 60+ and looking to retire soon.
All this considered, here is an easy way for you to manage your position sizing with a simple formula that makes it easy to implement and manage.
Position Sizing Example for Stock Traders
Let's use an example of someone with $100,000 account.
They know they can manage up to stock 5 positions.
In this case, you'd have $20,000 for each stock position.
A full position would be $20K
a half position would be $10K
a quarter position would be $5K
In most cases people don't go all in on a position right off the get go, they might start with a half of quarter position.
To know how many shares you can buy, simply divide the share price into the position allotment ie: is AAPL stock is trading at $250 and you want a quarter position, you know you need to buy 20 shares.
With this simple formula you know in advance how many shares you need.
Position Sizing Example for Option Traders
Options are different because the risk to reward is leveraged.
Many experts say that if you buy options you should position size for max loss. In most cases you should close the trade before that happens but you need to plan for it just in case.
With this in mind, you would never buy a call or put with money you're not 100% willing to lose. For some, that's 1% of their portfolio, for others its higher, and even for others its lower.
This is where it becomes a deeply personal question for yourself and the position you're in (remember example from above 40 year old vs. 60 year old).