A question for swing traders.

P

pharaoh

How do you diversify your positions? When I look at potential stocks that are suitable for trading, they are almost always in the high-tech sector, which in turn seems to give them all the same chart patterns--same break out days, same pull back days. (I looked at ten of my stocks last month and all of them gave me the same buy signal on the same day—likewise with the sell signal! Ten or so others gave me signals that were one day later or earlier, but all in the same direction.) If that is the way it is, then what is the purpose of having multiple positions? This situation seems to make the opportunity cost of searching through a basket of stocks while trading and keeping up with various positions worthless. I buy stock A and if the trade works, I sell. I see that in the mean time, stock B gave the same signal. I, then, search for another stock and find stock C, it goes the way I want it to, but I see that both stock A and B did the same thing. Should I look in different sectors? All these others seem to be too low in volatility for good trading.

If you hold more than one position at the same time, what is the largest number of positions do you hold?
 
Quote from pharaoh:

How do you diversify your positions? When I look at potential stocks that are suitable for trading, they are almost always in the high-tech sector....
If you hold more than one position at the same time, what is the largest number of positions do you hold?
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It's a good question, and what you're experiencing is common. Stocks in the same sector tend to often move to the same drum, so there are days when you'll have multiple entry signals. What I tend to do is take multiple positions, even in the same sector, but hold back a bit on position size. There is still value in diversification, even within the same sector. And often when you have multiple entry signals in the same sector, in a good system, it is an especially strong signal.

Much depends on your available capital at the time, and your confidence in your signals. But again, my experience is that multiple signals in the same sector is often a strong message to get in.
 
Quote from pharaoh:

Thanks to you both. Gives me something to think about. Anyone else?
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^^^^^^^^^^^^^^^^
PharOH;

Oh, high probability out of 10 good teck stocks;
2 or 3 excell over much time.:cool:

Prefer in addition to that excellance;
for example to narrow it down from 10 and another way to do it with more diversification is like SPY,QQQQQ.
 
Quote from pharaoh:

Thanks to you both. Gives me something to think about. Anyone else?
More...

When you trade with reasonably tight stops, you are also "diversifying by opportunity". The practice has a similar risk benefit as does diversifying by asset.
 
Quote from gnome:

When you trade with reasonably tight stops, you are also "diversifying by opportunity". The practice has a similar risk benefit as does diversifying by asset.
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Oops! Brain freeze! I'm going to have to think about that one for a while.
 
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