CURRENT HOLDINGS Long - SMH, TNA WATCHLISTS Long - KWEB,EWI,SMH,FCG,EWG,EZU,EWQ,OIH,XME,JETS,UUP,USO,XOP,ARKW,ARKK Short - GDX,KWEB,WEAT,SLV,LIT,XLU
What kind of position size are you trading as a percentage of your total capital? I've noticed that you will start a position then add to it. What would your starting position be and how much do you add?
Let me first say that I'm not advocating my methods of risk/trade management. Some of the things I do probably go against the grain of standard practices (especially for developing traders). I've been told by one reliable source that I could be adversely affecting my trading edge with my approach. I'm not inclined to track those types of detailed metrics, but I do OK with what I do, or so it seems to me. I'm not the type of guy who can tell you whether the trades I execute on Tuesdays before noon perform better than Friday afternoons or other interesting details which seem to be worth evaluating to some. Call me heretical, but I haven't even maintained an equity plot for well over 10 years, I'm sure. My monthly brokerage statement is enough to tell me how I'm doing. If I had a trading secretary, maybe I'd be more interested in digging deeper into these types of things. Again, this might not be the optimal approach from a strictly mathematical perspective. Perhaps it's more of a crutch or placebo that helps me to maintain a fairly fearless psychological attitude. My discretionary trading approach includes my approach to position sizing. I use sizing parameters that vary depending on a combination of these factors: 1. My read of the overall market and the particular trade 2. The direction of trade entry (entering in the intended direction of the trade or against it) 3. Whether I think I want to take on multiple positions or just one or two. I rarely will try to manage more than 3 different ETF positions at a time. 4. My recent performance (whether I'm on a roll or recently bruised). I vary the allotment per trade from 0.5% to 2.0% of account size (more commonly toward the lower end), almost never exceeding more than 3% total exposure for all positions for any length of time. When I am entering in the direction of the trade, I'm more likely to be conservative (smaller % at risk and/or wider stops) than if I'm "fading" or entering on retracement against the trade, when I'm more likely to use a larger risk % and/or much tighter stops. When I add to a position, I actually treat the addition as a new position. It might seem counterintuitive, but most of my adds are done after a position moves against me. Rightly or wrongly, I am of the opinion that if I consider the trade to be still viable after initial drawdown, I might as well pick up some additional shares "on sale", as long as I'm within the 3% max exposure. This is not to say that I add to every trade that moves against me. I'm sure that I abandon significantly more trades prior to my initial loss-stop being hit than I add to. I try my best to avoid taking full "1R" losses. I should also mention that I am more inclined to proactively exit a position (added or original) that was aggressively taken against the direction of the trade. By this I mean that I'm more likely to exit (at least partially) on the first sign of trouble. FOMO and other regrets be damned. I only make additions to a position that has moved in my direction if my original entry was conservative AND I have a large enough profit cushion to consider the addition to be a risk free opportunity. So maybe that's more than you asked for, but I don't use a one-fits-all approach. I think I hit most of the highlights. Questions and polite critiques welcomed .
Could you expand on Does this mean your risk or your position size? If your account size is 100K are you risking 3% (that is losing 3k per trade) or is your total position 3K.
0.5 - 2.0% per entry at initial entry. No more than 3% combined risk exposure for all open trades. Additions to the same ETF position are managed separately from the original entry, if that makes sense. Having re-read my post, I understand the confusion. The percentages are % of account at risk.
If you manage them as different positions do you have a different stop? Lower than your original stop on long positions? Would you risk exceed 3% with the combined position?
I will use a different stop on the adds, yes. Sometimes the stops are the same. If I exceed the 3% limit, it won't be by much and not for long before I'll adjust.
I just realized I didn't address this part of your last question, and probably left you with the wrong impression. I will use different stops, but never lower than the level that was used to determine the initial entry size. I could imagine possible scenarios where I might move a stop up and then consider backing it off later, but never past the original level.