Re: Gap risk = critical?

["Mike Lucero" <mikelu@xxxxxxxxxxxxx>]

1) If you took on 25 positions at once, you would be risking 25*2%=50% of
your portfolio.
2) Say your risk on an average stock was 10%, you'd be 250% invested.

I do similar calculations to normalize the initial risk in each stock, and
keep an eye on total initial risk, but after a stock takes off, I lose my
risk control. I use a trailing 10-12 day low stop, but that can be a pretty
big drop at the end of a stock's run. I also try to follow M (William
O'neill's Market) but do a poor job of getting out in a timely fashion.

Mike
----- Original Message -----
From: "Gitanshu Buch" <OnWingsOfEagles@xxxxxxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Thursday, July 13, 2000 2:21 PM
Subject: RE: Gap risk = critical?


>there is more of a "right" answer for
>each individual according to his trading style and situation.

we understand each other, then !

> So FOR ME setting my risk as a
>% of my total protfolio makes sense since I need to remain in the game long
>enough for statistics allow me to make money.

clear

>My plan is this.  I use a momentum system to get me into the trade,
>calculate the total dollars that I risk on the trade based at 2% of my
TOTAL
>portfolio, then set the stop based on a % of the entry price according to
>the volitility of the stock I am trading   and then use the math to
>determine the # of shares to buy.

So you could have 25 simultaneous positions with 50% cash without really
risking much and on zero margin. Sounds good...

I think all your earlier emails fall into place, given this data.

Thanks for clarifying, you seem to know your stuff !

Gitanshu