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Brandon,
Good remarks on money management system. I would like to ask a question about your 2% risk module, using your example of someone with a trading account of $50,000 and taking maximum of 2% risk on an individual trade. I bet you knew this question was coming.
Some portfolio managers various strategies of fully investing one's portfolio on a general market "up" signal, often taking ten simultaneous long positions for diversification. So, doing so would have the trader taking ten positions each with a potential 2% stop loss, therefore a total risk of 20% of the account, $10,000 in this case.
Here's the question for you. With your system, your strategies, your money management principles, how many positions do you take at the same time? I suppose this is even more relevant given the possibility of overnight holds during which time one loses control of the trade. If the general market reverses quickly, one could conceivably get stopped out of all the trades very quickly, having substantially more than a 2% total loss.
I am guessing you might recommend a trader initially takes only one or two trades at a time, gradually increasing with progress, but probably peaking at maybe 4 - 5 simultaneous trades. But I'd really appreciate hearing your take on this, especially since you seem fairly conservative.
Thanks,
Bill |
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