Upping position size/# of positions

L

LelandC

I wanted to throw this question out and see what kind of responses I get...

I used to know of a couple of traders that would trade lots of positions at once (ie sometimes up to 200 or so). The average position size was about 1000 shares so the risk was spread out over many different stocks. I think that this style of trading was used by several trading firm during the late 90's....

If one wanted to up his position size would what would be the best way to do it? Trade a handful of stocks and trade large size (ie 5,000) shares or so or trade multiple positions like I mentioned above (albeit on a smaller scale). I'm leaning towards the less is more strategy - trading fewer stocks with larger positions. Just looking for some suggestions as to how to better utilize trading capital.....

Hopefully this isn't too confusing??

Leland
 
My questions to you are:

Are those people who would have 200 positions at a time still trading?
What time frame were those positions?
What is your time frame or trading style?
What was their capital base?
What is your trading capital base?

My general comments are:

Unless you've got people working for you, it's nuts to have 200 open positions for pretty much anyone, regardless of time frame. If you're a swing trader, I could see having maybe 20 open positions at any one time, depending on time frame and if you're working with 100K plus. If you're daytrading, some of the best ones out there suggest anything more than 2 or 3 (at a time) is ridiculous.

In our Master Interview series, when traders address position size, they talk about how moving up in size is often wrong for their capital base or their trading style. But just as often, they talk about getting over committed, and not being able to follow all those positions. Often with the more you take on, all you're taking on is risk, not profit.

Just some cents.
 
I suppose this question is best answered as a function of your personality. But I find that especially in this market that if I have too big of a position I worry about it all night. However if I have 10 little positions of the same dollar value I could care less.

Also as a function of the market and the political environment I tend to take more of a technical/fundamental approach and try to trade things that I don't mind owning. If something happens tonight, I will be able to worry about what's important and not going bankrupt as a result of a sudden sharp sell off.

This also allows me to "Marry" my winners and losers. If I have a single large position, then I might "hope" it comes back.

For my bigger positions I would prefer to buy things like iwm mdy spy qqq etc. Again for the same reasons as above.

My final thought is sometimes it is hard to see things coming. For instance in Feb I bought RSTN, EMC, CSCO and MCAF @ 11 or 12. A day or two later RSTN warned and dropped 50% I lost a $1 a share just laying in bed thinking how much I love trading. However, MCAF rocked to $19 on a takeover offer several days later. If only I had not closed it so soon this would have been a nice package trade.
 
I too have been struggling with this recently. A major issue is that in taking many small positions you would need a broker such as IB where commisions are insignificant, otherwise most of your profits will go back to your broker. Another point is that while you would have mitigated individual stock risk, with so many positions open, you are now wide open to market risk and volatility (can you sleep at night).
 
My style is one of total focus on 1 position @ a time. I'm a daytrader-scalper-momentum trader-speed trader. I find that being totally focused on the trade @ hand allows me to make more profitable trades. It's all about concentration. A lot of the folks on this board are swing traders, so my style might differ.
 
Originally posted by echo33029
Another point is that while you would have mitigated individual stock risk, with so many positions open, you are now wide open to market risk and volatility (can you sleep at night).
More...

For which there are a couple of things you can do:

1) Have both long and short positions in uncorrolated sectors.

2) Play the smaller cap issues that tend aren't part of any indicies, and don't move with the market as much.
 
Don't know how much capital you have to spare, but I'm sure you can up the share size/trade and it won't make much impact on trading (unless you are microscalping or playing thinly traded names).

By the time you get to the point where you're outgrown a successful trading strategy because of capital, you'll probably won't need to ask here anymore :)
 
Depends on the timeframe. It would be difficult to manage ten dime scalps but easy to manage ten long term investements. On short-term trades never risk more than .25% to 2% of your account.
 
Leland,

IW Andre has some good points.

When the market was ripping 3 years ago that was the way to trade! We would just load up with so many positions that our blotters would have scroll off our screens (21 inch monitors)

To manage this many positions I sorted my my positions by the pullback this enabled me to pitch the losers immediately while letting my winners ride. (Playing RelStr)

In 2000 I started loosing a lot of $$$, not really from the positions, but from commissions. The market didn't have the moves that it used to. I have since stopped trading trading this style, but many of my acquaintances did not. Very few are still trading!

Currently, I will not put on more than 10 to 15 positions at a time. Too much market and commission risk in todays market.

Good luck!
 
Thanks guys (any maybe gals) for all the helpful responses. I do not know if the traders who would put on 200 or so positions are still trading but I do know they made lots of money when the getting was good. These guys would hold their positions overnight.

Potrader - you hit the nail on the head as far as the trading style I was trying to highlight. These guys would open up a bunch of positions (based on relative strength) and just pare out the losers and hold onto the winners. You make an excellent point about this strategy costing a lot of money in commissions.

Anyone here ever trade baskets? I think this is an interesting approach for highly correlated stocks/sectors such as the homebuilders. Take 4 or 5 highly correlated stocks from a particular sector and trade them as a basket. This could probably be done with the homebuilders, drillers, defense stocks, brokers, maybe insurance stocks. Just throwing out some ideas here....

Leland
 
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