Quote from nzbryant:
One question - why the significant volatility in position sizing? I wonder what the effect would be if a constant 2% risk to stop or some other position sizing method was used.
My position size varies based on four distinct factors:
1. The portion of my account used to trade Jack's Methods.
2. Risk of 2%
3. Stop loss of 5% of the current price.
4. Current price of the stock.
Protecting my trading capital remains my single most important objective. Meeting this objective requires I maintain a risk of no more than 2% (of the capital used to trade the system) on any one trade. Because I use a stop loss of 5% of the underlying equity price, that loss (if triggered) cannot exceed 2% of my trading capital. Keeping in mind the first two objectives, we trade a large price range of stocks - between $15.00 - $55.00 USD. One trade (UBET) had us in a stock trading at three dollars. Clearly, even with maintaining the 5% and 2% parameters, one has the ability to trade increased shares on lower priced equities - higher priced shares reduce the number of total shares purchased. I use the risk calculator (posted earlier in the thread) to determine my share size based on the four criteria above. I then "round down" to an even lot number - further insuring reduced risk.
In a post early in the thread, I briefly discussed the importance of money and risk management, and posted a link to a web site with detailed discussions explaining a variety of methods used. Would use of a different method improve my results? Possibly, but different risk and money management rules might also increase my risk of loss. My goal remains minimizing risk while maximizing money velocity. It is not by accident that I placed risk of loss ahead of maximizing profit in the previous sentence. Of course, your mileage may vary.
Quote from nzbryant:
Not ready to short yet - trying to perfect the long system.
During this week, I haven't received the correct signals required to take on a short trade either. Of course, based on the current time of year, this isn't too surprising. Remaining patient provides a constant challenge, but experience has taught me that sitting on my hands until the correct trade signals appear, prevents 'forcing a trade' which usually results in a loss.
- Spydertrader
). So I will have to learn this eventually. Right now, I'm just following your lead and you have not failed us yet. 