RTK may, of course, not get to $5 or $6, but technically there is nothing to stop it. No resistance above, we are in 52-,104-, 156- week high territory already, in the $3s we will enter that nirvana of areas, all time highs. Buyers have shown up in volume since mid August.
If you want reasonable portfolio performance, you can carefully trim winners at irrational but comforting points ("I'm up 35%, I'll just take my profits here"), but if you want great performance, you have to have some 100% and 200% performers to balance out the number of -10%, -8% trades and still end up plus 50% or better for the year.
For example, let's assume that you trade a portfolio of $400,000 in 40 equal positions a year, equal amounts in all positions ($10K per position) and that you have an equal number of winners and losers, and that the stocks travel in equivalent magnitudes, that is, out of your 20 winning trades (each with $10K of capital), 5 go up 10%, 5 go up 50%, 5 go up 100% and 5 go up 200%, and similarly with your losing trades, 5 go down 10%, 5 go down 50%, etc.
Now, assuming you cut all losses at 10%, then your 20 losing trades will be down $20,000.
If you cut your winners short at 25%, then your winning trades will be up $42,500 (50K up 10%, 150K up 25%), and your overall port will be up $22,500 or 5.6%.
But if you allow your winners to run to their maximum, your winners will be up $180,000, and your overall port will be up $160,000, or 40%.
This shows how hard it is to get stellar results without having some very good stocks run very well. Enter OMG, RRI, AAR and maybe RTK . . .
Kb |
