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Registered User
Joined: 8/11/2005
Posts: 26
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I'm a relatively new trader and was looking for some advice on how to determine the number of open positions at a given time. I do take partial profits, and let the remaining position run and also respect stop losses (mental stops to escape market noise).
My problem is that I have a short biased portfolio that I began accumulating on Feb 28. I was convinced that the market is headed for a downturn (as did many others) and started looking for shorts. My usual position size is 1/10 of my account value (give or take depending on risk) and I have close to 10 short positions open. Clearly that hasn't done well in the month of march. Do you have any advice given the past month, when did you initiate new shorts and when did you stay out?
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Call up a weekly chart of the SP-500 and
put a 45 week simple moving average on
it.
Does it look like 2000/2003?
Realize the market broke thru the 45 week
and the 45 week turned down.
(also note the sell-offs in mid 98 and mid 99)
Bull market corrections tend to be violent
and quick. (what we had in February)
The last correction did not even touch
support or pierce the moving average.
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As I see it there are two dangerous parts of your statement.
"I was convinced"
" (as did many others)"
You must always learn to be flexible in your thinking.
You must always weight the pros and cons of what you
are doing. You have to resist the urge to jump on board
or follow the crowed.
Also realize that crowd sentiment tends to be the opposite.
Traders are happy at market tops not scared. When you
see bearish comments, talk of short funds. It is almost
certain the market will go up. This is what contrary thinking
is all about.
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One last thing I would add. Shorting (in my opinion) is not
the opposite of going long. It is something you should not
be willing to do unless you understand it better. Not only
do you risk losing money on the shorts. You cant use your
capitol on the long side.
I would recommend if you are bearish or scared you go
to cash. If you must short I would limit it to 20% of your
portfolio.
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Realize that your situation is very common. It takes a lot
of experience to "ignore" what the media and others
are telling you. Human nature dictates that it is difficult
to be bullish when everyone is bearish. It is difficult to
be positive when there is fear.
Thanks
diceman
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Registered User
Joined: 12/21/2004
Posts: 902
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There's a bunch of factors that affect the number of positions that one has open at any one time - and they're pretty much personal factors that vary from person to person.
How much time do you have to give careful *daily* onsideration to each of your positions?
How much time do you spend scanning the market keeping abreast of current conditions and trends and looking for new set-ups?
What is the time frame that you are most comfortable holding each position (the shorter the term, the more attention that must be paid)?
How much time are you spending on "education" - reading and learning and trying out new ideas that have nothing to do with your everyday trading?
Have you given consideration to money management and have a plan in place to preserve your capital?
What is your track record as far as staying with your trading plans? Do you use hard stops or mental stops?
As a relative newbie - did you engage in paper-trading for awhile or did you just jump right in with real trading?
Do you utilize "risk/reward" analysis to minimize the amount of your capital that you are putting at risk with each trade?
Is the average size of each of your positiona large enough to keep transaction costs to a minimum?
These answers of course differ for each person.
THere's no reason to be "fully invested" and immediately place all of your capital at risk (and shorts are definitely riskier than longs) at the beginning - especially if you don't have enough experience to know how you react in adverse situations.
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