Re: Gap risk = critical?

["Mike Lucero" <mikelu@xxxxxxxxxxxxx>]

That's risking an equal amount on each trade, from Tharp's book "Trade your
way to Financial Freedom."

Decide how much you want to risk on each trade. Tharp says 2% of your
trading money is a maximum. Let's call this dollar amount rpt.
Determine where you'll place your sell stop before you buy to determine your
risk per share. Let's call this dollar amount rps.
The number of share you can buy is rpt/rps.

For example, say you have $100,000 to trade. You want to buy ABC at $100 and
want your sell stop at 90, so rps=10. Using a 2%-of-portfolio risk/trade =
$2000, you can buy rpt/rps = 2000/10 = 200 shares, for an investment of
200*100 = $20,000.

Some people like to buy with very close stops; Tharp recommends using some
percentage of ATR to calculate rps for them. He's got tables showing risk%
versus portfolio growth and drawdown.

Mike

----- Original Message -----
From: <Macromnt@xxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Saturday, July 15, 2000 6:33 AM
Subject: Re: Gap risk = critical?


In a message dated 07/15/2000 5:23:41 AM Eastern Daylight Time,
mikelu@xxxxxxxxxxxxx writes:

<< using position sizing a la Tharp.
  >>
 What is it?

Thanks.

Jean Jacques