Market Curiosity: Exploring Markets And Systems

May 1, 2010

Position sizing (updated Sep 2012)

Filed under: Editorials — Tags: , — Jeff Fitzmyers @ 3:09 pm

I tried position sizing based on volatility for a while since it is “optimal” and it did not work for me. I settled on a simple risk of 2% of capital per position because it works better for me. I don’t like to have a lot of open positions. I tend to trade like Dan Zanger. I think he allocates about 25% of his account per stock, has a $1-2 stop loss, and takes partial profit when the stock is up 20-30%.

An excellent summary.

Jeff Clark’s excellent article This May Be the Perfect Investment System …First, decide how much money you’re going to commit to the stock market. Take 90% of that amount and use it to buy low-risk value stocks against which you’ll be selling covered calls… That’s where the other 10% of your market portfolio comes into play… Reasonable speculations with call and put options are a good way to juice up the returns of a conservatively managed portfolio… [examples]… even if all of the speculative money disappears, the account still gains value.

Bulkowski’s Position Sizing examples of different models.

Risk Management for the Trader in 1 Lesson …This not only eliminates your risk of ruin for a string of losing trades but also lowers the volume of your emotions and stress hormones so that you can think and trade with a clear mind…

Fantastic article with lots of great quotes! Modern Portfolio Theory is for Nitiots — a special post written by my friends at MercenaryTrader.com

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