Money Management Thoughts

[AussieTrader]

You all know 3Stocks use 6.66% of portfolio per trade and on limited occasions 3.33% if risky play. That basically means you can open 15 positions (without margin, assuming all 6.66%).
Personally in my portfolio I use 10% per position or 5% (maybe less) if risky play (all variations on a theme though really). For initial stop loss positions I use a maximum percentage of overall portfolio approach which currently I set at 1.5% (now if support is within that 1.5% zone then I use just below support for innitial stop loss). So if I open 10 positions and they all go bad on me together (unlikely but you can have losing streaks) then my portfolio loss is limited to an absolute maximum of 15% (10 positions closed out with loss each equaling 1.5% of total portfolio). Once a position is open I'll then trail a stop behind support or pivot low points on the chart. If I reach a 20% gain I'll move my stop up to my buy point.
I try and automate this approach as much as possible so that I take emotion out of the ext process.
If we were in a raging Bull market I would increase my position sizing and loss tolerance accordingly, so that I would ultimately have fewer positions open. Reason being you don't need to diversify as much if winners are more numerous.

[tommyt]

Do you also keep "time" in mind? There are those that simply don't move, and after a while that is just as bad as a loss. It could have performed better, or worse, somewhere else, and time is money. Right?

[AussieTrader]

2 to 3 weeks maximum depending on the 'story' behind the stock. No point hanging on to a channeling stock when A) You could move money somewhere else or B) Re-enter that stock at a better (lower) price (if you still want to be in that stock).
All that said, this is from a short term trading perspective, in my long term port I have a different approach, even though I may potentially be holding the same stock in each account.

[stocky]

DJ Wall St. Firms' Asset Allocation Recommendations 


Firm Strategist Stocks Bonds Cash
A.G. Edwards Mark Keller 75% 20% 5%
Banc of America Tom McManus 55% 15% 30%
Bear Stearns & Co. *Francois Trahan 55% 30% 15%
CIBC World Markets a. Subodh Kumar 65% 21% 12%
Goldman Sach & Co. b. Abby Joseph Cohen 75% 20% 2%
Legg Mason *Richard Cripps 60% 40% 0%
Lehman Brothers Chip Dickson 70% 17.5% 12.5%
Merrill Lynch & Co. Richard Bernstein 45% 45% 10%
Morgan Stanley Henry McVey 65% 20% 15%
Prudential Equity Group Ed Keon 80% 20% 0%
Raymond James c. Jeffrey Saut 65% 10% 15%
Salomon Smith Barney *Inv. Strategy Grp 60% 35% 5%
Wachovia Ken Liu 74% 26% 0% 


Seems like they are quite bullish on stocks.

[stocky]

I personally like to keep atleast half in CASH most of the times. Idea is to use it for 'low hanging fruit' or 'Very short term high gain trading'.

Mostly trade 6.66% for standard and 3.33% for risky. Some of the pink sheets or OB will get 1.75% share. Rarely I use 10% for one position.

[Ramsburg]

Thats a great topic to have here

I'll give some input after the market. (applaud aussie for this idea)

[stockninja1]

I know this will sound insane, but I have found ways to make it work, and work very well:  I invest 100% per trade...cut my losses early and hold my profitable stocks until the first sign of weakness...  I also use a very strick method of screening my stocks and found my way into GLGS at $1.24 and cut early at $2.02....  I don't see any point in holding stocks through a correction, when you can buy back after the correction is over.

The name of the game for me is timeing and the aplication of Compounding...thereis nothing as powerful as compounding.

[Athakinu]

Interesting... I have done some daytrading and always had 100% in cash overnight. Do you hold  this stock overnight with your entire money invested in it or do you sell at the end of the day?

[stockninja1]

If I'm Sure on my investment I'll hold over night, perhaps a few, but once the stock has climbed, what I consider to be too high, I will sell and buy back the following open if it is still moving forward.

The most important aspect for me is making sure I buy only the best chart patterns...(early mind you)...and have profits on the table befor the close of the first day.

For example:  I bought TPLM today at $1.98 and i am now holding through the close.

[Athakinu]

You must have strong nerves...  Not for me to holding an OTC stock overnight with all my money invested in it... I would not get much sleep Good luck trading!

[stockninja1]

If we invest on strong technicals, or strong fundamentals...Risk is not increased by the location of a stock (whether it trades on the nasdaq or OTCB etc)

I trust the system I use...  In fact more often than not, strong chart patterns lead to gap ups which increase my profits nicely...

In my mind, either you trust the trade or you don't...  If you don't you shouldn't make the investment to begin with, and if you do...Why only take a small portion of your assets to the feast?

Warren Buffet, Peter Lynch, and William J O'Neil don't play the diversification = safety lie...why should we.  The two important facts I have learned from studying the masters is to a know your investment, and be time that investment.

[setravis]

All of our strategies may vary.What I find that works best for me,may not work well for you.
The key is to have a game plan going into the market. A good plan that you can stick to,
where as to increase you gains, cut your losses, and ensure that you come out ahead!
Have a game plan.But I will wager that all of us here, our game plan will differ in some way.
If that game plan we have is working for us...Stick to it.