Building a portfolio with open profits

greenscreen

Newbie
4 0
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
 

NVP

Legendary member
36,733 1,871
Your just scaling in.....are you moving the stops on earlier contracts as well ?
 

greenscreen

Newbie
4 0
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?
 

tomorton

Legendary member
7,306 975
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.
 

greenscreen

Newbie
4 0
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.
 

Kaeso

Established member
836 91
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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