I try to use a formula which is damned hard to calculate unless you plan before hand. I cannot do it on the fly.
no more than 10% in one stock at a time of the risk/trade portion of the portfolio. I trade less than 25% of the portfolio the rest is cash and bonds. max loss for the stops is 1% of the trading portfolio (ten percent loss in the stock)including trading costs, so the number of shares makes a difference, and usually I try to make that even smaller. On a 12 dollar stock, a stop might be 60 or less cents. you must at all times remember that it is better to lose little and win little than lose big. the mm will see your stops and eat them if you can, so I only set them if I go away. If you done wrong, do not be afraid to short the longs and long the shorts. dont just sit there and look at it. if you do not have real time graphs, do not trade.
be really careful about your entry. know the stock works- watch it for a few days or weeks and try to see how it is handled. make sure you know what announcements presentations and economic data is coming out the days you plan to hold the trade. be really sure about what the box or cloud probability of your stock is and make sure your stops are out of the box so you do not nail yourself and lose out of a perfectly good trade that you entered wrongly. I also usually do not day trade but prefer a small trend. Know the fundamental situation of the stock and know what risk you want.
All the money I have lost is money that I failed to follow my own rules with. The ones I have made occurs when I follow my own advice. before you trade make a two week to ten day time span box and march it along a chart of the stock to see what pairs of entries and exits would be good either for shorts or longs for the time period. Ask yourself what the chance of the stock to go up is verus the chance to go down. Ask yourself "is it safe", for those of you who remember the movie. be prepared to shoot yourself in the foot. it is not easy money.
Although I look at various indicators, I do not have the years of experience as others on this board have at interpreting them. Federal Reserves posted an excellent review of risk and the author of the article stated that after bicycle helmets were used widely, the rate of bicycle injuries went up. this is because people perceived themselves to be safe. If everyone uses the same indicators there should be a predictive test that show how predicitve they are and whether that predictive power changes over the years. Da Boyz can hire a lot better people than me in big armies to do thes calculations and must know the answer. I worry that these indicators are bicycle helmets and catastrophe theory reigns
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