<<...lets say you were just starting out with a few grand as your base. What are YOU going to do?>>
I think the first thing you should do, before you even contemplate making a trade, is to figure out how much risk you want to take on each trade and how you plan to manage your money. With a few grand, you can only take a couple of shots, and if they're wrong, you will be out of the game.
For example, if you plan to daytrade, the average bar on something like AMZN is at least $2 so the closest stop you can have and leave decent room for a wiggle is at least 2 bars, at least $4. So if you trade 100 shares at $112 (a $11,000 trade needing minimum margin of only $5,500 at most brokerage firms) you need to have a stop that is minimum $400. Given that, you can only make 5 losing trades in a row and that will be it, so you have to reduce size or increase funds.
A good rule of thumb is to not risk more than 1.5% of your account equity on each trade, so that you can ensure survival. Working those numbers out backwards, we are looking at having an account size of $27,000 to trade 100 shares of AMZN at today's price in order to be conservative and survive the game. |
