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Do you want to discuss your risk control? I notice a difference in the amount you are willing to risk per position.
As a percentage of your capital you risked 0.34% with LUN and 1.62% with MEI
As a percentage of you investment you risked 4.2% (LUN) compared to 14.7% (MEI)
Do you take into consideration either percent of capital at risk or percent of investment at risk when entering a position or setting your stop?
"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
Can you help answer these questions from other members on NexusFi?
I am not anal about % of capital or % of investment.
As far as initial investment goes...I like to have a minimum of 500 shares of a stock worth $20-$40/share...I would never buy less than that number as I don't believe I am making enough money...I will tolerate between a 5-10% loss if the stock starts to dive...this is from the get go...once the stock makes money I will be looser on this requirement or tighter...it depends on how I feel about a down turn.
With a stock in the $10-$20 range, I will purchase 1000 - 1500 shares initially
with a stock in the $1-$9 range, I will purchase 2000 - 5000 shares initially
with a stock in the $0.30 to $1.00 I will purchase 5000 to 20000 shares (yes I do have a couple of low pennies...this is one that I initially purchased at $0.17...several years ago I bought it at $0.20 and sold it at $1.20...that was when it was a mining property in Northern Manitoba then with potential (copper/zinc)...now it is almost a mine into production...I have high hopes for this stock VMS.V - SharpCharts Workbench - StockCharts.com ...)
As time goes on and with a successful stock I will add shares as time and spare cash permit.
When I decide to sell a stock...a winner or loser I will take a look at where a support level is and set the stop-loss
Just below that support...I always use stop-losses rather than outright sale of a stock to give it a chance to reverse its trend....If I still do not like the future of the stock I will raise the stop-loss as the stock price rises...there is no formula for this ...it all depends on my feeling at the time...
I have found this way is the best way to trigger sales...it takes a lot of emotion out of the final trigger.
When I sell something worth say over $25,000...I will review my portfolio and sprinkle at least 2/3 of this money among winners in my existing portfolio increasing their share volume. The remaining third I will probably put into a new company.
I am a great believer in increasing my share volume total.
Another comment on Risk Management from my point of view. I think of risk management as the first stage of an investment. I usually pick pretty solid companies...I am confident in making decent choices when starting a run. It is not infallible as you have seen but if I lose between 5-10% after short time following the stock purchase then I will use stop-loss limits to potentially leave a declining situation....But once I show a decent profit, I relax those rules a bit and allow a significant pullback as long as it does not put me into a loss position....it is sort of like playing with the "house money"....If for example a stock has risen and become profitable but encounters a stiff resistance but fails and pulls back then as long as it is still positive I will let it do so and may even add to the holding if I view the risk ok for it to attempt this resistance again....or if I decide that it is time to protect a profit I will set a stop-loss limit below that support line...I may trip it and get a reduced profit but as long as it is a profit I am moving forward.
I just looked at the portfolio this morning and saw that Nordion Inc. [NDN.TO] had a nice 6% jump today....woohoo...
it had an excellent quarterly financial report
As you can see it has burst through a resistance I found at $11.10 in my POST #49 in this journal
I had to use a coarser chart as the price rose off the finer chart and I could not see what was ahead. the next resistance will be at $12.50 and that will be huge!!! if this stock can breach this then we are well onto our goal of at least 30%.
So that is my target now $12.50 and $11.10 is my new support...No stop loss for this company at this point...no point as the news was solid and real.
Well it was an exciting week....I have lost a couple of losers added a winner and overall recovered from the loss from the previous week.
Since starting about a month ago we are up about 0.61%...we were up a lot more at the beginning of this day as ADF Group surged on news of a good quarterly report to over $12.00 briefly...it burst through a resistance at $11.10 as noted in a previous post but it settled down to $11.20 by the end of the trading day.
Am I upset at not latching onto this surge?? No, as I am not an intra-day trader. If I had sold the stock at $12.00 it could have kept on going and I would have to chase it to get back in....losing money in the process. As it stands the $11.10 which was a resistance now is a decent Support level...which was tested and held.
If you look at that chart you will see that the price as it crested $12 was a mile above the upper Bollie...the pullback was natural and expected. One oddity in an otherwise bullish move is the decline of the Slow Sto . But this may be due to that rapid rise then decline of the share price today...The MACD and BBwidth are normal.
this is my sentiment chart and all looks fine....maybe the CMF is mildly bearish so it bears watching
I have another worry in Western Forest Products [TSX:WEF]
this has all the look of a real decline...the latest run resulted in about a 100% gain. I can find no bad news so I imagine there is profit taking at work....See how the Stow Sto has been in decline for a while now as well as the MACD but the BBwidth has shown a sole uptick...not enough to really signal a harsh downturn....but then It is not encouraging.
Now you will see I have drawn a support line at about $2.32 or so....this would make a nice place to stop the fall if the move is simply profit-taking.
Looking at the P&F chart you can see this is a huge support now
So that resistance/support line that I see in the Sharpchart also exists in the P&F chart which dates from years ago.
So this suggests to me that $2.30 will be decent support for the stock
As a result I will set a limit-stop-loss for WEF.TO for all the shares at $2.23 to $2.26
This would incur a bit more of a loss if this stock continues to fall but I am willing to take that risk as I believe this to be a pretty decent stock and no bad news...so it must be profit taking after a 100% gain that is driving this correction.
I still have to find a place for the $19k that I have available...I will make that decision over the weekend.
Underexposed; like I said I don’t want to hijack your journal or become a troll. I do like to challenge conventional wisdom. Just let me know, PM if you’d like and I’ll cease and desist.
There is no house money. It’s your money. How does losing money you have invested differ from losing money that you are ahead? You look at the total in your account at the end of each day or each week. In reality that’s your money.
Sounds to me that emotions are ruling your investment decisions. The Fear of missing a move is greater than the Fear of losing a few dollars.
Why don’t you consider that you could have sold at $12 and now you would have to take $11.20 as losing money? If you had sold at $12 and it had kept going up you would have made money and lost opportunity. You can buy stuff with money; you have trouble buying stuff with opportunity.
Better than a 1 to 3 risk/reward ratio. You can afford to lose better than ½ your trades and still make a good return.
Do you use the same risk reward parameters when you add to existing positions? That is do you move your target price up?
I guess I am anal about % of capital. I hate to risk more than 1% of my capital on any trade. That doesn’t mean that I will only buy $1000 worth of a stock with a 100k portfolio; it means that I will attempt to keep my loss below $1000 on any trade.
If the distance between my entry price and my stop is 50 cents then I will open the trade with 2000 shares ($1000 divided by 50 cents). If the difference is $5 then I’ll only buy 200 shares.
The number or shares I buy is determined by the risk. My minimum risk to reward is 1 to 2.5 although I prefer 1 to 3.
I could care less about percent return on each individual trade. I look to make either 3% of capital or lose 1%. On a 100K account with a 1 to 2.5 risk/reward and winning about 40% of the trades, I only have to make a few trades each week to make a decent return.
"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
You are not hijacking my journal...at least by this point anyway. I don't mind your questions
It is not my money at all until I sell the stock...once a stock is showing a positive return, I am not risking my capital...I am risking future profits as I see it. So like a casino gambler I suppose, who sets his initial poke aside once he starts winning he won't risk his initial poke for that run. In stocks I feel the same...I will bail out of an investment that does not go well risking about 10% loss in the process....but once the investment return goes the way I had hoped then it becomes a series of steps...I will re-evaluate the continuing of an investment run as we approach each resistance or falling back to a support. No, it is not my money until I end the investment run.
Tell me an investor that does not let emotion influence his decisions...are you cold-hearted in your decisions??? With respect I doubt that. Selling always was the most difficult part of my plans...I have found that using limit stop-losses as I have shown the best way FOR ME to reduce the emotion of the sale...and I am comfortable with that.
As far as the situation with Nordion Inc.....It would have been impossible for me to sell that stock at $12.00...I AM NOT an INTRA-DAY Trader...I can go days without looking at my stocks...I am doing it daily right now because of setting up this phantom portfolio. I basically update the state of the union of my portfolio every weekend and it is the overall gain/loss that concerns me. Having said that though, when a stock approaches the level of risk concern as Western Forest Products is doing right now...then I will investigate and take the action that I have indicated.
To repeat...I don't follow a stock on an hourly basis so the opportunity is missed....if I wished to take it. In this case the stock surged on an overreaction to a good quarterly financial report...it has fallen back but I believe the price will rise again in a more rational fashion.....I don't worry about small gains like this that I have no knowledge about. I have not lost those gains as of yet...they will return if that financial report was true...and reading it I believe it to be.
MY risk assessments are based on how I see the resistance/support stairway of a chart and the gaps between those levels...I believe I have been quite successful at doing this in the past.
Well, it seems you are not a Long term trader ...from what you say you sound more like a short term swing trader. We have a different set of priorities, you and I.
$100,000 is a very small amount of money...I have been retired for over 10 years with investments in stocks being my sole income...a good year for me is 15-20% gain ... an ok year is 5-7%. On a $100,000 poke that is not a living wage obviously....but it will serve to demonstrate that I can make a decent gain over a year...After about one month I am up 0.6% overall so far...so far I am on tap for an OK year....I expect to do better as time goes on.
Many traders show little respect to longer term traders...I hope to show that we make money too.
How about when you have an unrealized loss. Do you consider it a loss?
For what it’s worth, I track my portfolio by its total value much similar to your system.
Why would you doubt it? I attempt to be as cold hearted as I can be. I have a plan and I follow it religiously. I have stops that I honour with out question and have my targets set with limit orders. I have no buyer or seller remorse. If I sell and the position moves further in my favour it’s lost opportunity, but as they say opportunities are like trains there will be another along soon.
I agree. The stock gapped up then filled the gap. The volume shows lots of sellers at that level. If who ever was unloading is finished, price will more than likely continue in the direction of the trend.
I don’t think there is anything wrong with your method. It seems well thought out and more importantly it’s something you are comfortable with.
My Goal: To follow my trading plan.
Number 1 priority: preserve my capital.
I have both long and short term and dividend portfolios. I have different accounts at different Brokers for each style. The long term account is slowly growing my capital, the dividend portfolio gives me a pretty steady dividend income and the short term swing trading account allows me to afford my hobbies and spend the winter in Arizona.
15 -20% is realistic and a respectable return. You should do better on a good year and with you cutting losses quickly you won’t be hurt too much in a bad year
I have the utmost respect for any trader who has a trading plan and the discipline to follow it.
"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
those returns that I quote are AFTER I subtract my living expenses which come 100% from the stock market so if you look at GROSS returns the percentages are much higher.
My approach has changed with time....2008-2009 was a real eye-opener for me....I had no clue what to do so I basically did nothing but hunker down and rode out the storm, not selling any stock at all, taking paper losses but not real ones.
I had prepared for such an event by salting away about 5% of my previous gains into TD Money Market and I calculated I could live 3 years on this money If I had to....thankfully it lasted only 1 year. That strategy allowed me to survive intact and my stocks rebounded in 2009 recovering about 1/3 of my losses back then. But that was 5 years ago....I pay more attention to things now and have spent time learning fundamentals....the little I have learned have helped me make better stock choices.
Well I congratulate you on this...you are one of the few
...from what you say you sound more like a short term swing trader. We have a different set of priorities, you and I.