Danwell Home said:
So when do you guys start to scale up positions? When I started, I kept the mindset of becoming net free. So I try to buy 200 shares when possible and 2 options usually. I try to keep my option plays around $500 or less and shares under $2000 total for larger companies, $1000 or so for small caps, and $250-500 for OTC/speculative/pennies. MA stocks can get well over $5k. What kind of % are you guys looking at for each trade relative to total portfolio size?
I've increased my $ limits before and it's so easy to lose what you've previously built in such a short amount of time. I've began to hedge more with SPY and QQQ. How do y'all approach this?
I am sure you will get various answers here. I personally approach most all trades or positions using position sizing. Percentage of account at risk' (2%, 3%, 5% , etc.) divided by the entry price minus risk level (stop) price. That determines how many shares $ value I buy. I don't say I will risk $5,000 on this trade since that implies I am willing to lose my entire investment. I try my best to hold to my stops (I cover my eyes on options too often).
Now I can't honestly say I do this 100% of the time but at least attempt it as a sound discipline. There are times I have a disproportionate % in a position but only when I have a high degree of confidence there is an opportunity buy level.
I also try and keep a % ratio for stock, options and cash depending on the market sentiment. Here is a position size chart/explanation Ripster posted some time ago.
Wealth gained hastily will dwindle. but whoever gathers little by little will increase it.
Proverbs 13:11