end of dayers how many stocks?

Discussion in 'Trading' started by chipmunk, Sep 30, 2009.

  1. The big gains and big risks come from focusing on a few stocks. But that is your optimal number of stocks to invest in (end of day)?

    I knew a guy who only invested in one at a time..Made a ton of cash (millions) but then lost half of it. I guess it is gamble.....but one that can pay off big IF you are lucky.

    Personally I invest in 5 at a time. Or I should say I divide my account into 5 and look for opportunities. I have suffered the odd gap down but I take it on the chin. I guess if I was manging OPM I couldn'r be so focused. But it's the only way I get the gains I do.

    And you?
  2. martymjp


    What do you mean by end of day. Do you buy only at the close and what is the strategy?
  3. NON day traders...overnighters I meant.
  4. Dacamic

    Dacamic Guest

    My personal preference is to have a maximum of ten open positions.
  5. rwk


    I have done some testing with this and found that fewer stocks generate greater return, but more stocks produce a smoother equity curve. Both are good, depending on your preferences. Other traders have confirmed this.
  6. ok....so define "fewer" and "more"

  7. rwk


    I have a short-term system that I tested with 2 through 8 stocks at a time. The changes in returns were substantial and linear based on number of stocks, though tests all were profitable.
  8. 2 i think is too risky....if you get a gapper you are looking at a big loss.

    8 is quite widespread......and gaps wouldn't hurt you.

    I think somewhere in between is good: 4-6

    Can you share those results? What kind of drawdown did two at a time give you?
  9. rwk


    My tests with number of stocks only recorded total return. In my experience, my worst hits were loss per stock in the order of 1-2% of the entire account (e.g. $1-2k on a $100k account). Usually all the stocks move together, up or down.
  10. I had 10 open positions in live accounts, but am now moving back down to 5. Better to be a little conservative right now.
    I have also tested strategies with various numbers of positions (everything else being equal) and higher was definitely more profitable. I have no exit conditions, but if things really tank, I'll get a margin call.
    #10     Oct 1, 2009