Position size, or the number of shares you purchase, is a subject often overlooked by many traders. How many of us have an actual method that we use and stick to, or are we arbitrarily using the same number or percentage with each trade? Today, Chuck LeBeau, who is soon to be inducted into the “Traders’ Hall of Fame,” an INO TV author, and exit strategy specialist has stopped by to introduce a positioning method that can be introduced into any portfolio.
Read his strategy for determining position size below and leave a comment to let Chuck, and other Trader’s Blog readers, know what you think. Also, check out Chuck’s newest endeavor at SmartStops.net.
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Deciding how many shares to buy on each trade is easy – once you know how!
How many shares should you buy when you enter a new position? Most investors are creatures of habit and buy the same number of shares each time, usually some nice round number or dollar amount. Others are a bit more sophisticated and invest a certain percentage of their portfolio value. If your portfolio is $100,000 and you add a new position you might invest $10,000 or 10% of your account size or maybe you just buy your usual position of 100 shares. If any of these procedures sounds familiar to you, you need to learn more about how to correctly determine the correct number of shares to buy. The pros refer to the correct procedure as “position sizing”. [Read more...]
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