Building a portfolio with open profits

This is a discussion on Building a portfolio with open profits within the Psychology, Risk & Money Management forums, part of the Methods category; Hi all. As per the title I am thinking that a good money management technique is to add positions only ...

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Old May 29, 2018, 6:02am   #1
 
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Building a portfolio with open profits

Hi all.

As per the title I am thinking that a good money management technique is to add positions only once previous ones have open profits behind them.

eg

Buy stock 1 at $100 @ 1% risk. Stop loss at $90

Buy stock 2 ONLY IF stock 1 progresses to $110 ie 1R.

and so on.

To me this works like scaling into an individual stock but instead a basket of stocks are treated as one.


Does anybody have any thoughts on this as a risk management technique? I thought of this after buying 5 different positions together and they all went against me together resulting in a 5% loss of equity!

I've not read about this anywhere but surely it must be used (unless I am missing something)

That's
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Old May 29, 2018, 10:28pm   #2
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Your just scaling in.....are you moving the stops on earlier contracts as well ?
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Old May 30, 2018, 12:56am   #3
 
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Originally Posted by NVP View Post
Your just scaling in.....are you moving the stops on earlier contracts as well ?
Yes I am moving stops on earlier positions.

It's just that some build a position in a single stock when it moves into profit.

I'm just asking why this needs to be done when each subsequent position can be taken in a different stock.

Why enter subsequent positions into a maturing trend?
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Old May 30, 2018, 8:24am   #4
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Originally Posted by greenscreen View Post
Yes I am moving stops on earlier positions.

It's just that some build a position in a single stock when it moves into profit.

I'm just asking why this needs to be done when each subsequent position can be taken in a different stock.

Why enter subsequent positions into a maturing trend?

In a sense you would be gaining diversification of risk by adding positions in alternate stocks. So instead of 10 positions in one stock, you could have 1 position in each of 10. Up to a point, this is better protection against a single stock-specific risk but is no better against an index-wide risk.
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Thanks! The following members like this post: greenscreen
Old May 30, 2018, 10:46pm   #5
 
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Originally Posted by tomorton View Post
In a sense you would be gaining diversification of risk by adding positions in alternate stocks. So instead of 10 positions in one stock, you could have 1 position in each of 10. Up to a point, this is better protection against a single stock-specific risk but is no better against an index-wide risk.
But also I am thinking the equity curve is less lumpy than scaling into a single stock where one down or up day would effect all positions in a single stock.

I'm a serial equity balance checker so need to find a way to not do this so this is the best I could come up with. Micro positions being added to new stocks as previous ones move into profit.
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Old May 30, 2018, 11:21pm   #6
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Originally Posted by greenscreen View Post
Hi all.

As per the title I am thinking that a good money management technique is to add positions only once previous ones have open profits behind them.

eg

Buy stock 1 at $100 @ 1% risk. Stop loss at $90

Buy stock 2 ONLY IF stock 1 progresses to $110 ie 1R.

and so on.

To me this works like scaling into an individual stock but instead a basket of stocks are treated as one.


Does anybody have any thoughts on this as a risk management technique? I thought of this after buying 5 different positions together and they all went against me together resulting in a 5% loss of equity!

I've not read about this anywhere but surely it must be used (unless I am missing something)

That's
was the 5% loss around the beginning of February by any chance? if not roughly when was it?
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