RISK MANAGEMENT

Stewardship

Good stewardship of your finances does require some effort. But the return is more than sufficient for the effort. This is why it is recommended not to exceed more than 5 positions. It is easy to lose focus with any more than 5.  Think of the stewardship of your portfolio as raising 5 toddlers. For their welfare and growth, you can't afford to take your eyes off of them for any given length of time.

 DO NOT TRY TO RECOVER LOSSES OVER NIGHT, OR TIE UP OVER 20% OF YOUR CAPITAL IN ONE POSITION.

Buy half positions to start. When they're up 2% (using alerts), Finish the Position

 "Stops on a Portfolio/Total Account"

1. Never take more than a 5% loss in your account in a single week

2. Never take more than a 10% loss in your account in a single month

 Risk : Reward

Risk: (Buy Price less Mental Stop Loss)

Reward: (Price Target less Buy Price)

Do not pursue if the Risk to Reward is less than 1 : 3.

Position Sizing

Do not risk more than 2% of your trading capital on any one position.

For example, your trading portfolio is valued at $10,000.

You want to execute a position on a stock priced at $100. with a MENTAL STOP at $95. The number of shares on your position would be calculated as follows ...

2% of $10,000 equals $200.

$200 divided by a tolerable stop loss at $5 ($100 price - $95 STOP LOSS) equals 40 shares.

This too, is subject to your comfort level (i.e. You may want to increase the STOP LOSS to $10, so you would only purchase 20 shares.)