DIVERSIFICATION AND FUNDS ALLOCATION
jose- great question, sorry it took me so long to get to this one. But I think it's important that everyone know how I do things.
Let me start by saying, that I, or you, should NEVER put all your eggs in ONE basket. You need at least two baskets, one being CASH.
From there, although my trading style is fairly consistent, the amount of cash and total money in the market fluctuates. If I happen to get a huge profit somewhere, I generally take the money out and re-invest it somewhere else. For in this market, you can really only have so much stock in my opinion.
On one week, I may have 20% cash on hand to jump into a quick play, and the rest could be split between 4 stocks. The next week maybe I only have 1 or 2 stocks, and 30% cash. It really all just depends on what plays are going on that lend themselves to my style.
I personally, don't like to be invested in more than 4 stocks at a time, unless of course there's COMPLETELY LONG stocks like a Citigroup or something. I don't like having to follow Level 2 for multiple stocks all day and confusion and crazy eyes make for bad trades.
Another thing to take into consideration is how much money you can actually put into one stock. Often times, "loading the boat" as I've put it before is VERY HIGH RISK and the odds of being able to liquidate a stock quickly is impossible.
So...if you said, "hey Jefe, here's $100k free money, can you go invest it wisely in the OTC?" I'd tell you NO. Because with that kind of money, you're either going to OVERBUY one or more stocks, or BUY TOO MANY STOCKS to efficiently trade.
But, everyone has their own opinion, style, risk threshold, etc. I just know that I can efficiently watch and trade a few stocks at a time, and do it well.
