How to manage the risk?

One way is to permit the maximum loss per trade to 1% of the account.

For example, a $100K account and 1% of the account is $1000. If the stock price is at $25 and the stop price is set to $21, then buy $1000/($25-$21)=400 shares.

The drawback is if a very stable stock suddenly go down a lot. For example, the bank company stock normally is very stable. So we can set small stop. If the price is at $100, and stop is set to $98, then we can buy 500 share. Those 500 shares cost $50K, that is 50% of the account value. If the stock gap down to $50 in one day, then we will lose 25% of our account value.

To prevent this situation, we can either set the diversity rule, that is no one stock can exceeds 20% of the account value, or just buy stock at the position value at fix percentage of the account value, say 20%.