tf ... you're asking me to hand over the keys to the kingdom ... seriously, your question is something I always have on my mind. Reason, if you're anything like me your goal is to be a pro, and to be able make as much money as possible without losing any.
Patience ... do I really need to be in a situation where I need patience?
Me and Ionic Energy ... a few years ago Shiningbank Energy Trust made a play to take-over Ionic Energy -- terrific ... the stock went nuts and then it started selling off ... it sold off so much that there was a 30% arbitration. So figure what the hell, can't lose right? So I loaded up, the more it fell the more I loaded up ... actually the more it fell, the more reread the press releases and the less I slept -- at one point I had 55% of my portfolio tied up in one stock? This was a sure thing right? I found this to be the most difficult sure thing I've ever participated in -- the mental stress wasn't worth the 40% arb I enjoyed two months later when the Shiningbank shares hit my account.
Two months felt more like two lifetimes-- especially when you see other stocks move forwards and you're stuck with the grand majority of your wealth locked in and sitting at a lose.
There's a lesson to be learned somewhere in there.
So getting back to position sizing ... Some folks only have $5000 and with that, your stuck plunging -- typically with a $100,000 you could play as many as 10 stocks? Personally, with $100,000 I would probably play 6 or 7 stocks and with the goal of buying stocks that trade in the 7-10 dollar range. Higher the price-- the better T/A works because then your speculation against professionals. Ok, here's a rule of thumb-- 5% towards a single stock-- 20% towards a single sector? But it isn't written in stone, I'll hold a heck of a lot more of Kinross then I ever would of a stock like Moydow ... liquidity dictates my acceptance of risk. Btw, some folks are bond traders only so the 20% towards a single sector might be too chicken shit.
Anyway ... I could stretch this post to a couple of thousand words, but it really depends how much money you have, how good of a trader you are and how long you expect to be in the game.
Anyway ... your question is an excellent one, the debate shouldn't end here with this post.
Regards,
Michael........
FP........................................................
AI
