Beating the Market with Money managment

220volt, that sounds like a beginning of a good strategy, but I must admit that it is just a very tiny part of the strategy with which you may have to spend some more time to develop.

Your strategy may be more complete if you consider how you could ensure the 3% is achieved. As well, it would be best to consider how much drawdown you are willing to take.

Pension Admin
 
Quote from HolyGrail:

220V you are not mentioning your risk at all. How much are you willing to lose to gain that 3%?
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that's right

he talked about limiting his win, but not his losses

that's the EXACT OPPOSITE of money management
 
I would limit the risk with technical and fundamental strategies, and my expectations are only 3% of gain which also contributes to low risk management.
By doing your homework (TA and Fundamentals) on a certain stock you will significantly lower your risk, especially if you're expectations are low.

Investing $10,000 on only two securities with lot of research, low expectations and stop loss if far from gambling. I never said that $10,000 is my whole portfolio. I just name it for easy math.

You're right I didn't set stop limit, but I wanted to see what others might contribute to beginning of a strategy.
So far some very helpful advices. Stop loss might be between 3%-6%

Thanks to all for helpful advices and i won't even bother comment on those who immediately put me down.
 
Your method assumes it is only a one-way street (3% on the upside. To get an average of 3% a trade, you're probably looking at possible distribution of returns like this: +15%, +4%, -10% (average is +3%) assuming you are not doing risky stocks. If you are capping your positive returns at 3%, guess what you will have? (+3%, +3%, -10%, for an average of -1.3%). You've instantly gone from a positive to negative. Bottomline: consider all scenarios, and do not limit your upside when you are right!
 
Quote from neke:

assuming you are not doing risky stocks.
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These are hard to find. :D

Even with superior fundamental and technical analysis stocks can move against you for unforeseen reasons. Lawsuits, analyst downgrades, SEC investigations are a few things that make investors bail. :(

MM to me is preserving your capital.:)
 
If you are capping your gains at 3% you will most likely have to cap your losses at 1% or less to avoid catastrophe. I think the philosophy of capping gains is probably not a good one. I have capped my total gains for the year and stopped trading for that year, but I have never capped gains on any individual position.
 
I just read this thread and some of you are simply acting with pure arrogance.

220,

I think you need to combine money management with good trading strategy. You need both to succeed, not just one or the other. On top of that, you didnt mention your stop loss strategy or which tecnique you would use to pick your stocks, simply saying good ta/fundamental analysis doesnt cut it heh

Lots to learn my friend, trading is not as simple as just picking a good money management system, assuming its good in the first place.

If I may, use a stop loss of 1.25% and at 3% gain change your sell strategy to a .75% trailing stop so you can ride some of the potential breakouts.

Good luck.
 
Reason why I want of cap gains too is because most of the losses come from holding security for too long or waiting for it to go higher.

Second reason why I want to cap my gains is that this strategy could work in bear markets too.

I think some of you are right . I would have to cap my losses at 1%.
I also like neet's suggestion putting a trailing loss at .75% and let it ride little longer.

One of TA strategy to capture 3% withing one month time would be jumping on a strong trend (macd, trendlines, RSI, and momentum)
If company fundamentals are also healthy, do you think it would be hard to capture 3% withing a month?

I don't think value investing would be a good strategy since it might take a while for a stock to take off using a value strategy and in the mean time my stop loss could automatically be activated. I think jumping on a strong trend would be better idea.

I know you would miss some rocket gains capping the stock at 3% but I am not trying to get rich quick.

I think 3% a month expectation using MM, TA, solid plan and discipline is pretty reasonable.

So far some good advices.
Keep em coming.

Thanks
 
Quote from 220volt:


I also like neet's suggestion putting a trailing loss at .75% and let it ride little longer.

Thanks
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I use the strategy myself. Assuming the trailing stop stops you out it would still be -1.0% vs 2.25% in terms of risk/reward ratio, which is still pretty good if you factor in the possible breakouts which are not that unsual. One more thing as far as your stops, dont stick to 1.0% exactly, if it makes more sense to use 1.1% because it has proven support, by all means do so.

As far as the 3%, many stocks will do 3% up or down in a single day. Under a month ? Almost guaranteed unless it's an index or something much more stable.

When choosing your picks remember the market is always right. This is far more important than any analysis, technical or fundamental. Then choose a strong sector and a strong stock within that sector. Once you do that, implement your money management strategy and it should all work out if you stick to your well defined rules.
Beware of volatility, nothing like getting stopped out from a bad behaving stock only to end the swing at a loss when the freaking security closed at 4%+! :)


Good luck and happy to help, I love this shit :)
 
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