Don't you limit the number of shares by how much of your account should be allocated to a single stock? Tony Oz's calculator limits me to having only 25% of my equity in anyone security. That's a protection against a trading halt that could gap the wrong way after the halt. Also, do you consider margin as part of you account size?
I was a sucker for a 2 years. I did exactly as they had said in those 100 different books, but I still lost money. Then one of my friends suggested me why not do the exact opposite. If I was wrong by following them, then I had to do something exact opposite to what I read in those books to be right. It kinda made sense to me and when I got a MACD buy signal, I shorted stuff and it did work. I guess the key is money-management. Hope this helps and let me tell you that I am not a successful trader at all but atleast I have all the money left that I started with.
I did that one day, but while on vacation, on an island, that had no phones,on a holiday weekend and my broker had lost his cell phone. (replace the word stocks with commodities)
People who make money do so because they have identified an edge, and then trade only (or mostly) when that edge occurs, using good risk management to control losses. If you are a loser, it is most likely that you either do not have an edge, or trade without an edge, or use poor risk management. This is usually due to lack of market experience/knowledge, failure to apply and learn from that experience, or poor emotional control. The way to go from loser to winner is to identify an edge, which (usually) takes a lot of research and/or experience. Once you have done this, you have the main tool required to make a profit. Until that point, you will most likely lose regardless of what you do.
Amongst others: 1) Fading emotionally driven buying/selling climaxes. 2) Following the market when it is moving against the prevailing market sentiment. 3) "Buy the rumour, sell the news" trades. 4) Following major bull or bear markets. 5) Purchasing assets which are discounted due to fear about temperory factors which have no impact on the long-term outlook. 6) Trading "relative performance" e.g. going long stocks which do not go down much during market weakness, and which soar during market strength.
My problem was that I kept losing money, but it was never that extreme. It seems like from day 1, I always kept more or less breaking even. In fact, most of the time I had a small profit before commissions, but the commissions amounted to anywhere between 100% and 200% of my gross profit, in other words, I was taking a few hundred bucks a month out of the market and giving it all as commissions to my broker (and whomever they have to pay), plus a little bit out of my own pocket. Therefore, in my particular case, reversing my strategy would only have increased my losses. I do, however, remember one thing in particular that took me years to learn, namely to trade with the trend, and what this really means. If a stock opens down a dollar at $20, then goes to $19, then slowly to 18.50, then back up to 19 fairly quickly, I used to think "now it's taking off" and buy that stock at that point in time. I figured out fairly quickly that such a strategy would almost always be bad in the case of SPY, but for some strange reason it took me months to understand that this very observation was true of almost anything that trades, and this is what they mean when they tell you to always trade WITH the trend. Anyway, I just kept trading, even though I was merely breaking even, because I had a master plan: I figured if I can break even trading stocks, I should be able to trade futures profitably, because futures commissions are relatively smaller. Guess what! I was right. IT was not easy, though. For more than a year, I would try and trade (of all things) ES for a day or two, just to check if I was ready for futures yet, and I always sort of panicked as soon as a position went a couple of points against me. After two or three of these trades, I was quite stressed out (and usually down a grand), and I would turn my back on futures for another couple of months. I would trade futures relentlessly, increasing my risk as I became more confident, still only breaking even and never even attempting to actually turn a profit. I just needed to prove to myself that I could break even consistently, and at the same time I felt that I was getting used to larger and larger drawdowns. My worst losses happened when I had finally reached the point where I could let a futures position move a couple of thousand bucks against me without panicking. Or so I thought. I did not panic, but instead I was paralyzed and could not well close out the position either. If I remember correctly, I lost about $8000 that month, and by the end of the month, I was starting to get that old stressed-out feeling again. But by then it was too late to simply return to stocks and put futures on hold again. I simply traded less for a few weeks, probably 10% of my usual number of trades, and somehow I overcame it by just keeping at it, not doing much, not risking much, not losing much, not thinking much about it. I didn't even look at my statements or P/L. So much so that I was rather surprised a couple of months after that, when I suddenly found out that my last monthly statement showed a $6000 futures trading gain after commissions. What I had been planning for so long, had finaly become reality: I was doing the same thing with futures that I used to be doing with stocks, only where commissions for stock transactions would eat away 120% of my gain, futures commissions are only taking about 15% of the cake. By the way, one of the reasons I did not notice the gain from my futures trading activity right away was that for some strange and twisted reason I had become so used to trying to break even that I would buy out-of-the-money stock options almost on a daily basis, in a more or less subconscious attempt to keep my account balance constant. When I looked at the options trading statement, I just thought to myself: Let's see, I spent $8000 on MRK options last month. Then MRK finally made the move I had been hoping for, which paid out $2000, reducing my loss to $6000. And I keep buying stock options ... why? The one thing that does not seem to work too well for me is "letting my winners ride". I find that I usually make a little more on a move if I keep trading it (hyper)actively instead of just sitting there and watching it inch up. But it really depends on the day. Sometimes, there just isn't anything you (or actually a reasonable trader) can do except sit and watch and maybe close out your position at the end of the day. If you expect the market to drop a point or two, why would you risk being left behind by attempting to squeeze out a couple of extra 32nds? It also helps to have a long-term perspective and opinion. For example, when the big upside surprise job report (or whatever it was) came out that Friday (I think it was a couple of weeks ago), I was expecting it to be a negative surprise, so I went short ES. I think it cost me ten points or something like that. But if it had been a negative surprise (or actually, if the masses had realized right away that it was a bad number) I would probably be sitting on a 50 point gain by now, maybe still holding. By the same token, the way ZB kept trading higher and higher in the first quarter of 2004, you could just feel it coming. I mean, what was more likely, for it to go up another point or to drop three points? This is the 30 year interest rate of THE most important economy in the world we're talking about. (Actually, the way I understand it, it's really more like a 15 year rate, but I don't understand enough about it to say with any degree fo certainty.) Anyway, at some point interest rates will have to go up one way or the other. If the 30 year bond reaches 0%, Who is going to buy more of it? On the other hand, there WILL come a time when a $100 bill will be worth the $0.80 in today's dollars that it costs to make the bill. This is as certain as death, and more certain than taxes. And many traders know this. In other words, there is potential for a crash in the treasury market, but not much potential for a buying frenzy. With stocks its a similar, although of course fundamentally different story. In my view, it is actually a little more complicated, because when money loses its value, the price of stocks goes up "automatically", whereas the value of companies (who are forced to use and accept the very legal tender that is in the process of collapsing) decreases. Historically, the value of stocks can be expected to drop by 70%, but at the very same time, the value of the dollar is going to drop (almost) to 0. It should be fun, and I can only hope (although I realistically don't see much indication) that it will not happen for another few years, because I am not just ready yet. I have a question for you guys as well: Those of you who know what an "alt" is, do you consider yourself one? When we happened to see Mad Mad House the other day, I asked my wife if I could become an alt, and she told me I already am one. Who'd a thunk?