How many positions is too many?

[sammy84]

Hey all

I'm getting a heap of buy signals in the last 2 weeks, however I am holding back a little for fear of having to many long positions in the market. How many positions do the ASFer's out there restrict themselves to?

Also do you limit the amount of longs or shorts at any one go?

For info I currently like no more than 10 positions, each which I hold average for a few weeks.

Cheers,

Sammy

 

[white_goodman]

Hey all

I'm getting a heap of buy signals in the last 2 weeks, however I am holding back a little for fear of having to many long positions in the market. How many positions do the ASFer's out there restrict themselves to?

Also do you limit the amount of longs or shorts at any one go?

For info I currently like no more than 10 positions, each which I hold average for a few weeks.

Cheers,

Sammy

i dont trade stocks anymore, but id say if all hit SL as a worst case scenario it should only wipe approx 5% of an account

 

[beamstas]

Depends..
What level of portfolio heat is acceptable to you?

If you are willing to lose 10% of your portfolio due to a black swan event, then you could open 5 trades with a 2% of capital risk, or 10 trades with a 1% capital risk.

If you don't mind losing 50% of your portfolio you could open 25 trades with a 2% risk

IMO there is no "hard number" of positions that you can have.

Just work out how much portfolio heat is acceptable to you, and how much capital you will risk per trade. Once you have that worked out its simple maths

Brad

 

[nomore4s]

Depends on your risk levels.

What I do is workout how much of a hit my account would take if all stops are hit at once. If this is too much of a hit, I've got too many positions on.

But once I can get a stop to breakeven or better I can than open another position.

The problem with the market looking to rally off a low like this is you will get plenty of buy signals - I'm getting heaps as well. You just need to filter them some how.

 

[Stormin_Norman]

like goodman said. risk 5% on any one event.

take a long, it goes up a nice amount. place a stop loss at 0

risk then = 0%

risk another 5%.

if it goes well, set SL = 0

risk for 2 positions = 0%

take another position.

rinse.

repeat.

 

[sammy84]

Thanks all for the responses, 5% seems like a good general measure, will take that on board.

 

[pilbara]

I currently like no more than 10 positions, each which I hold average for a few weeks.

since you hold these long positions for less than a month, maybe you could look into using put options as protection. They'd have to be outside the money so they are not too expensive, and only useful if things really fall. Or if you are buying a basket of stocks on the ASX then you could use index futures as additional protection.

 

[Stormin_Norman]

Thanks all for the responses, 5% seems like a good general measure, will take that on board.

yo yo

check dis.

 

[tech/a]

Your governed by your position sizing and capital base.

Read up on "Portfolio heat".

 

[sammy84]

Thanks Stormin, however unfortunately excel for macs doesn't yet enable macros, I will have to try it on a pc.

Tech, I read up on portfolio heat. From what I could gather it applies to 'free' trades aswell. When position sizing do you use your liquidation value or liquidation minus portfolio heat?

One last question, what about market correlation? Im assuming that the US and AUS markets would be too closely correlated that your can treat them separately? What about FX and equity markets, are they correlated enough to warrant a reduction in positions?

Thanks for all the answers to date

Sammy

 

[kam75]

In otherwords, when does diversifying become de-worse-fying? It depends on the size of your account. I hold a maximum of 6 stocks at any one time.

regards

 

[tech/a]

If your holding winning stocks then --Never enough.
If your holding losing stocks then---Far too many.

Sorry couldnt resist the obvious.

Tech, I read up on portfolio heat. From what I could gather it applies to 'free' trades aswell. When position sizing do you use your liquidation value or liquidation minus portfolio heat?

Sorry just saw this.

I use total liquidated capital.
But then most of the time Im only risking .05%.
If its running then I may take a position which risks 2%.
I only trade 2-4 at a time as thats all I have time for.