RM for Swing Trading / Question about 2 Strategies

[traderbiker]

Hi,

i am currently working my into swing trading, and i have a question about money management.

my original plan is/was to risk a max of 0.5% per trade, and calculate then the nr. of shares i can buy with my margin. i do understand this strategy (limitations, total portfolio risk, correlation, and so on).

i am following also some homepage who offer some kind of trading/stock-picking server (just to get started, not for trading them), and i saw that some of use a "fixed % position size" (eg a full position is 5% of the equity).

i can see the differences, you have a max amount you can loose on a single stock even when it gaps down, every stock influences the equity in the same way (1% gain is 5%*1% gain), i can trade more stocks than with upper one (as the position size is usually smaller here), ... i can not make use of narrower stop-losses, ...

can anyone elaborate what the advantage or reason behind this strategy is, or to put it better, when to use this one above the upper mentioned?

thanks,
christian

 

[murray t turtle]

Quote from traderbiker:

Hi,

i am currently working my into swing trading, and i have a question about money management.

my original plan is/was to risk a max of 0.5% per trade, and calculate then the nr. of shares i can buy with my margin. i do understand this strategy (limitations, total portfolio risk, correlation, and so on).

i am following also some homepage who offer some kind of trading/stock-picking server (just to get started, not for trading them), and i saw that some of use a "fixed % position size" (eg a full position is 5% of the equity).

i can see the differences, you have a max amount you can loose on a single stock even when it gaps down, every stock influences the equity in the same way (1% gain is 5%*1% gain), i can trade more stocks than with upper one (as the position size is usually smaller here), ... i can not make use of narrower stop-losses, ...

can anyone elaborate what the advantage or reason behind this strategy is, or to put it better, when to use this one above the upper mentioned?

thanks,
christian

===========
Christian;
Yes, the smaller[.05 risk seems much better] than 5%. Something else to study-so much money has been made with low probability TREND Trading, some study hi probability TREND trading, not that that's the best way to TREND trade.

But i wouldnt consider 5% risk in delivered [not mortgaged]real estate a problem at all, for an experienced trader/investor. Not a prediction simply probabilities/wisdom.