Sunday, January 02, 2011
How many times have you fantasized about catching a stock that rockets 100%, 200%, 300% in a year? Now, looking back on your investing career, how many times have you caught that move and sold exactly at the right time to realize the gain?
We pore over those books like “Monster Stocks” or “How to Make Money in Stocks”. You see the charts of stocks making huge moves and start thinking “just a few of those and I’m on my way to early retirement”. In reality, they are trying to capture 10 to 20 percent of a move.
For 2011, toss out those grandiose expectations and start thinking small, small gains are good. Small gains combined with proper risk and position sizing can lead to triple digit gains over a year.
For my method, I am looking to sell when I have 6% or greater on any given trade. Rinse and repeat. Most likely you are trading a different time-frame with different stocks. You need to figure out what is optimal for your style.
It’s not as glamorous as hitting the home-run, but it is a way to generate consistent and stable trading method that will pay out year over year.
A starting point for proper position sizing would be the risk calculator: