01-10-11 02:31 PM Will be taking 3% risk max per trade which is 288.00 . Due to last year, I think I'll be doing things a bit differently. I'll do my best to limit my risk to 1-1.5% for the first entry, and as the trade develops, add the other 2 to 2.5% risk. Many of my trades last year just weren't working, and I was taking a beating. Lesson learned, moving on. --- short 480 dell @ 14.08 stops 14.29 target zone 13 Attachment: dell.jpg Kon, I'm looking forward to your journal. I've got to make a comment about stops and position sizing As a fellow swing trader, I've done all the wrong things over time-and just got the wind knocked out with a portfolio loss of 5% this past week as I experimented with "wider" stops in a number of open positions. (I was 'All In -with some winning positions and some recent days old adds) This year I realized I had an issue with not allowing winning trades to develop into longer term trades, and so plunged into what was a trending market the prior week. Timing is 1/2 the battle they say! Stuff happens, and I've got to say it was a spur of the moment and I got the spur by the market. I'm not familiar with pitchforks, but I see you've got a specific 3% ($288.00) potential stop. This is based on your total account value. I see you also will trade multiple positions simultaneously, and not just a single trade. Consider this: While you work out this year's strategy, I'm also working out mine. Consider last year ended as a bull market, and we may be entering greater volatility. Let's assume you enter 5 trades and each has a 3% stop. Potentially, if all positions are hit, you're down $288 x 3 = -$864 on the whim of a correcting market. Therefore, you're not down 3%, you're down 15%- You could position size your stops on the total dollar value of each position. If you take a partial position-say 1/2 , you allow 50% risk, and if you add to that position, you add the other 1/2 assuming your position is profitable . Let's say in my $10K account I'll use an average position as $2000, for a maximum of 5 positions on. For that $2k position size, I decide a max % loss . Let's assume 3% while I try my approach- if I can only Risk 3% on an individual trade , that means I have to have a stop at a level that only loses $60.00. Sounds ridiculous -Yes! Let's assume stock XYZ is a break-out candidate @ $100.00 with support @ $96.00 I could buy 20 shares to get my position full size, and I'm risking 4 x 20 = 80. That's $20 over my 3% Risk. I need to purchase fewer shares (15) to stay within the Risk allocation. Once price continues higher and I can raise the stop, I can add the remainder of the position to the trade $500.00 Having this tighter criteria makes you consider better entry levels, and if stopped out on the first attempt, you can make a second or third using the narrower risk if you choose.. Don't get me wrong-I'm not posting as a great trader-Still struggling to achieve a methodology that will give me consistancy in swing trading. In spite of my occaisional sloppy trades , lack of discipline, impulsiveness etc. adhering to the basics of a conservative position sizing approach has allowed me to survive in spite of myself- and my weaknesses. A while ago, Another trader suggested I needed to consider a different position sizing approach as I was struggling - I'd have some winning trades, but also substantial losers with wide stops. Got caught in some changing markets and whipsawed all over the place. The position sizing approach worked in reducing my losses. My need to lock in profits and not allow my winners to run was a weakness I still need to overcome- I'm sure there's plenty of good articles on various position sizing methods on ET. Van Tharp gets into it in a serious way in Trading Your Way to Financial Freedom. Everyone has a different approach to the markets, and so please take these comments as they are intended well - One swing trader to another. Longevity is the start. Best of luck in 2011- SD
well intentioned post on my part - but I now see that you have been trading for some time, and so you have likely determined that this works for your approach & time frame. I tend to be too restrictive. Risk adverse , no pain, no gain ? I assume that larger Risk should be accompanied with the potential for larger reward, and that's achieved by holding for a longer term. That's something I'm going to try to achieve this year. Anyways, Good Luck, look forward to your charts, and your future trades-SD
Thanks sow. There are many ways to manage risk, however on a per trade basis, 3% is the max amount of risk. Sure those loses will mount both $ wise and % wise if im not profitable, but thats the way it goes. Due to my small account, sometimes I have trouble even with 35% because I'm unable to buy the amt of shares I want. If I cant buy at least 100, I normally pass.
Konviction... I am not sure if you are looking for any advice in this journal or not, but that in no shape was a short sell imho. If you are using pitchforks consider restricting them to the proper timeframe. IE, make sure the bars in the area dont add up to over 12. What this will do is greatly reduce your entries/whipsaws. Don't take my word for it... Find charts of pitchforks and use your current method and simply eyeball 4-12 bars max as price oscilates in the pitchfork. See how much more accuracy you will get this way. The bar count here is not meant to be set in stone necessarily, but it will prevent you from selling into a strong trend on a lower timeframe with a lower timeframe stop, when in fact you should be shorting into the higher timeframe with a higher timeframe stop. Did my best to explain that in a short period. All the best...