Q&A by Don Bright
POSITION SIZING IN STOCK TRADING
How do you position size in your stock trading? I buy strong stocks above the intraday breakout with close stops. My problem is I feel that my initial price is important, and once I add shares, it changes the whole dynamic of the trade. I know that position sizing is very important (cutting losses, adding to winners), and being that my good trades last three to four hours, it’s something I should be doing. Thank you.
A couple of things come to mind. First, the actual intraday breakout price may or may not be a good entry. You really need to take a few more things into consideration. Where are the futures trading? Where are the “peers” trading, sector and otherwise? Basing entry points just on breakouts can be very costly in this day of high-speed algorithmic trading. Entry and exit points must be clear before you address any concern about trade size.