Consider margin with money management?

Discussion in 'Risk Management' started by jwcap, Jun 27, 2012.

  1. jwcap


    Newbie here to this forum.. Have traded for a long time but never for myself so in process of thinking about money and risk management. Sorry if these are on another thread but I couldn't find anything.

    Question 1: If I start a margin account that starts with $50,000 and with margin is $100,000 -- if I decide to not risk more than 2% of capital on one trade is that 2% of the 50 or the 100?

    Question 2: I like to trade 9 specific stocks and 5 specific commodities. Is the best way to allocate funds to each market just the 100k divided by 14 and that's how much to play with in one market? Or is their a better way to formulate this

    I am sure I have other questions but that's it for now. Thanks in advance
  2. Congratulations on 50 to 100,sounds better than Buffett.

    Question 1:I may try 50,not 100.

    2:just choose 1-3 stock,and 1 commodity,I usually allocate money 5:3:2 or 3:2:1 for each stock; buy more unless with margin fullfill over 6-8%,or sell when support line breaks.
  3. 1: For 2% risk and account size with margin 100K you select the smaller number of shares as given below

    N1= 1000/stop, stop is in points (ex. $2 off the entry price)

    N2 = 100000/p, where p is the stock price

    Take N = min(N1, N2) (In other words you never exceed purchasing power while staying below 2% of 50K)

    2: This is a hard question with no easy answer. Depends on variance and expected return. Just trade one thing at the time or equally divided risk.

    Send me pm for links to position sizing articles.