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Position Sizing, How Much Should I Invest?

Started by Zach Bass · 9 months ago

There are many theories and techniques that professional traders use to size their positions. For some, it can be very formulaic, especially for forex traders, taking the human element out of the equation and let the computer do the work. A properly sized position can mean the difference betwe ... Continue reading »

4 comments

  • Zach Bass

    1 year ago

    This is perhaps the most significant post I have written to date. It's not about a cool Apple product, or some happening in the market place, it's just darn good advice. I encourage every investor/trader to consider this methodology.
    reply
  • alattlr

    10 months ago

    Zach,

    Good advice if you are entering the market.
    Is there a similar "method" or technique to know when to EXIT a position?
    Say you got into Apple long at around $85 and it has now doubled. How do you decide
    when to take the profit, and if you do, how do you RE-ENTER the market with the same stock to try and capture future gains (which in the case of Apple seems highly probable in the next year)?
    Forget the CAP Gains aspect for now since the investment might be in an IRA.
    reply
  • Zach Bass

    10 months ago

    A simple strategy would be to sell half your shares and purchase options. I might buy deep in the money Calls with that. In that way you could control 3-4 times the number of shares. This would be somewhat risky, but if you expect the price to continue to rise, you will accelerate your profits with the added leverage.

    The other possibility is to sell half your position and buy a multi-leg position using a Strangle. With a strangle you would make profit whether the price went up or down. Check my most recent blog post called the "I have No Idea Strategies".

    And of course the most sensible strategy would be to sell half and use the proceeds to purchase a diversified set of index funds. I would dollar cost average into them.
    reply
  • alattlr

    10 months ago

    Zach,
    I am just beginning to learn about options, so will consider your advice as Ii get some understanding of it all.
    Thanks,
    Al
    reply

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