Allocating funds....
in my opinion, being undercapitalized in day trading runs the same risks as being undercapitalized in any business venture.
You need enough capital to take advantage of the market movements as they present themselves. Lets say the market is down 220 and you are willing to bet a rally. So now you have to decide what stocks...if you read my previous longwinded post, you would guess I might look for stocks that will perform with teh amrket, forget small caps, they will do their own things, probably not down at all or wont rally with the market.
So maybe I buy Lucent. But what if LU doesnt move?
My feeling is that if you are trading, you need to have enough for 2, 3 and at best 4 positions of 1000 shares each in various stocks. If youare trading 5 buck stocks (which I usually dont) you dont need to much. If you cant afford to own 4 positions, 1000 each of a 30, 40 buck stock, you're in a tough position as well.
because if the market moves, the window of opportunity is sufficiently small taht you need to make the money then and there and then pehaps nothing for the rest of the afternoon. You need to own those 4 positions, because perhaps 2 will be good winners, 1 barely a scratch or 1 a loser. Ofcourse, the downside is all four become miserable losers, but then again, the importance of stops.
For day traders, nothing less than 500 shares should be traded, else you are looking for too great a move and will miss the multiple 3/8 gains that come looking for the elusive 1 poitns gainers which are just too hard to come by.
Regards,
Steve @yamner.com |
