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Strategies & Market Trends : Technical Analysis - Beginners -- Ignore unavailable to you. Want to Upgrade?

To: Judy who wrote (10400)	6/1/1999 11:47:00 PM
From: Christopher	Read Replies (3) \| Respond to of 12039

Judy, You use TA to pick your stop and that stop should not exceed 2% of your total capital if hit. If it results in 5% of your capital as a loss then you should pick another stock and leave this one alone. Here is how the 2% was picked. If you flip a coin indefinitely then the number of heads will be equal to the number of tails. However, every 1000 toss you will have 10 heads come up in a row or 10 tails come up in a row. This means that you could have a bad streak of 10 losses in a row. If you lose less the 2% of your total capital then your total loss will be less then 20% of your total equity. Next question. Why is it so important that you don't exceed 20% of loss of your total equity which is the reason 2% was picked? What happen if all of your stops get hit in one day? How much will your % loss be? Christopher