The Billion Dollar Club

hajimow · Nov 22, 2007

I also see some redundancy in your portfolio. XLNX and ALTR are both in the same narrow sector of programmable devices. IF one goes up or down, the other one will follow. You are short both of them. Either you will be stopped out in both of them or you will make a profit in both. In football terminologies , you have two goal keepers !!

How do you select your stocks? What are your screening parameters? I think that is the important thing.

OnTrial · Nov 22, 2007

Quote from hajimow:

I thought when they talk about 2% or 5% risk they mean 2% or 5% of the value of that position and not the value of the account. So for a 5 million account with 2:1 leverage and 20 equal positions, 5% risk would be 5% of 500,000= $25000. Since you are using leverage of 2, from $500,000 in each position, only 250,000 is yours. So 5% of each position would be only $12500 !!

Hi hajimow,

I believe 2%/5% refers to value of account NOT position. Anyway, that's how I was using it. My risk per position is always more than 2% & in many cases more than 5% as well.

OnTrial · Nov 22, 2007

Quote from hajimow:

I also see some redundancy in your portfolio. XLNX and ALTR are both in the same narrow sector of programmable devices. IF one goes up or down, the other one will follow. You are short both of them. Either you will be stopped out in both of them or you will make a profit in both. In football terminologies , you have two goal keepers !!

How do you select your stocks? What are your screening parameters? I think that is the important thing.

Well spotted, sir!

If you notice, my short positions are very small in size. I could have traded just one of the two stocks at double the size I have in each one, but opted to play both of them.

My screens at the mo are just fundamentals plus liquidity. I've actually been thinking of reducing/eliminating sector/industry redundance, but haven't got round to it yet. Rather than eliminate it completely, it is more likely I will get FAB TEAM to take it into account during asset allocation.

Thanks for the reminder.

Talking about goalies, England could have done with two of those last night!

hajimow · Nov 22, 2007

Quote from OnTrial:

Hi hajimow,

I believe 2%/5% refers to value of account NOT position. Anyway, that's how I was using it. My risk per position is always more than 2% & in many cases more than 5% as well.

This will be my last post here on this topic because I don't want to litter your journal and drag it into other topics. So if I have one million in my account and spend 10% of it to buy a position and sit 90% on cash because I can not find any other securities to buy ,2% stop loss would actually be 20% of that position? So If I buy the stock at $100, the stop loss would be $80?
So If I have 10 equal positions each 100K and if I want to have 2% stop loss of my total account value and if suddenly market drops and all my stop loss orders trigger, I will lose 20K in each trade and I will lose 200K of my account?

OnTrial · Nov 22, 2007

Quote from hajimow:

This will be my last post here on this topic because I don't want to litter your journal and drag it into other topics. So if I have one million in my account and spend 10% of it to buy a position and sit 90% on cash because I can not find any other securities to buy ,2% stop loss would actually be 20% of that position? So If I buy the stock at $100, the stop loss would be $80?
So If I have 10 equal positions each 100K and if I want to have 2% stop loss of my total account value and if suddenly market drops and all my stop loss orders trigger, I will lose 20K in each trade and I will lose 200K of my account?

I believe that when Joab said 5% risk, he meant risk as in position sizing and NOT risk as in stop size. If I am wrong, I hope he corrects me.

Normally, there are no hard & fast rules about stop size since it very much depends on one's system. In fact, for a swing trading system, a 2% stop would appear much too tight to me, but that's just my opnion anyway. On the other hand, it is universally (well almost) accepted that 2% is a safe guideline to use for position sizing.

Please feel free to continue this discussion. I don't mind one bit.

Joab · Nov 22, 2007

Quote from OnTrial:

Assuming you allocate equal capital to each position, I don't see how you can have as many as 20 open positions and still risk up to 5% per position.

For a 5m account with 20 equally funded positions and assuming 2:1 leverage:

Capital for each position = 5m x 2/20 = 500,000
5% risk = 5/100 x 5m = 250,000

To calculate risk in each position (i.e stop size) = 250,000/500,00 = 50%

In other words, to risk 5% when you have 20 positions you will need to have a 50% stop. Is this how you go about it, or am I just being dense?

As a discretionary trader I don't put the market into a box.

I "personally" also don't use percentage stops I merely illustrated it for these purposes.

I prefer hard dollar stops and the number of shares I take will depend on my entry and stop price.

ie: Risk $500
Stop 9.90
Entry 10.00

$500 divided by .10 = 5000 share allocation.

also the amount of Risk / dollar amount will vary depending on the trade and how much I like it.

OnTrial · Nov 22, 2007

Quote from Joab:

As a discretionary trader I don't put the market into a box.

I "personally" also don't use percentage stops I merely illustrated it for these purposes.

I prefer hard dollar stops and the number of shares I take will depend on my entry and stop price.

ie: Risk $500
Stop 9.90
Entry 10.00

$500 divided by .10 = 5000 share allocation.

also the amount of Risk / dollar amount will vary depending on the trade and how much I like it.

Hi Joab. I was also using the percentage stops for illustration.

In fact, it's possible that I misunderstood what you meant by 5% risk.

Using your illustration, does the max 5% risk refer to the $500 (i.e max position size based on a $10,000 account) or to the 0.10 (i.e max stop size based on stock value - meaning that for a $10 your max stop would be at 9.50)? I assumed you meant the former.

Thanks.

OnTrial · Nov 23, 2007

Squad List There is room in the team for zero more Long & zero more Short players. Players are listed in order of preference. If and when the team is filled, all other players that satisfy the entry requirements will sit on the bench.NOK Drtn: Long Entry Stop: 38.50 Entry Limit: 38.52 Disaster Stop: 36.52 Qty: 567SYNA Drtn: Long Entry Stop: 53.94 Entry Limit: 53.98 Disaster Stop: 50.12 Qty: 568

Joab · Nov 23, 2007

Quote from OnTrial:

Hi Joab. I was also using the percentage stops for illustration.

In fact, it's possible that I misunderstood what you meant by 5% risk.

Using your illustration, does the max 5% risk refer to the $500 (i.e max position size based on a $10,000 account) I assumed you meant the former.

Thanks.

Correct.

Keep up the good work with the thread and if you can incorporate fills on a soon as possible bases that would go along way to verifying your results.

OnTrial · Nov 23, 2007

Current Team for 26/11/2007 ERIC Drtn: Short Entry: 29.93 Date: 07/11/2007 Disaster Stop: 31.43 Qty: 300 Cost: $8,979.00LCAV Drtn: Short Entry: 17.48 Date: 08/11/2007 Disaster Stop: 18.35 Qty: 600 Cost: $10,488.00ALTR Drtn: Short Entry: 18.66 Date: 09/11/2007 Disaster Stop: 19.82 Qty: 250 Cost: $4,665.00XLNX Drtn: Short Entry: 22.83 Date: 09/11/2007 Disaster Stop: 24.74 Qty: 200 Cost: $4,566.00NDAQ Drtn: Long Entry: 41.83 Date: 13/11/2007 Disaster Stop: 37.96 Qty: 470 Cost: $19,660.10SYNA Drtn: Long Entry: 55.60 Date: 13/11/2007 Disaster Stop: 50.51 Qty: 360 Cost: $20,016.00MTG Drtn: Short Entry: 23.01 Date: 15/11/2007 Disaster Stop: 25.33 Qty: 210 Cost: $4,832.10MER Drtn: Short Entry: 56.67 Date: 15/11/2007 Disaster Stop: 62.35 Qty: 90 Cost: $5,100.30