The Thread Formerly Known as No Rest For The Wicked Message Board

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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked

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To: darline cook who wrote (84272)	1/3/2000 10:22:00 PM
From: charlie mcgeehan	Read Replies (2) of 90042

hi darline if you don't take offense i would like to explain a system i use and it has worked very well for me. i think it is safe to say that you will have a better chance in the markets if your money management skills are better than your stock picking ability. many good traders will risk no more than 2% of their portfolio on any given trade. that means that you could be wrong ten times in a row and still have 80% of your capital. people like to think they can hit a home run and put 25, 50% or even more of their capital into one trade. no matter how sure you are that a trade will move the way you believe you have to ask yourself how can i be sure. this morning was a perfect example. if you see the pre open gaps and decide to place 25% of your portfolio on a can't miss stock (idc is a good example) you would have lost a lot of money this am). you say you have 12k in your account. that means you can risk $240.00 on any one trade. that does not mean that if you want to buy a stock worth $20 that you go 240/20 equals 12 shares. it doesn't make sense because commissions would slowly erode your capital. it means that you set your stop/loss at $18 7/8. you risk is 240.00 - stop is 1.12 - so you can buy up to 214 shares at $20.00 and not have more than 2% of your capital at risk. probably best to buy 200 shares and keep your purchase out of odd lots and risk less than 2%. i hope that makes sense to you. it you are right on the stock and it moves up 1, 2 or more points you have a nice profit and if you are wrong just a small loss. all the best charlie

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