Building a Portfolio/Number of Positions

Hey Marty, Newbie here still trying to figure out all the nuances of what you're trying to teach. I've got a number of questions but will start with this for now. If you've already answered it just tell me to re-read the Archives! I have a fixed amount of money to trade with. For ease of discussion let’s say 100K (I'd assume any amount would result in the same strategy).

For Longer term holds, how many positions would be appropriate? Let’s say 10, do you sell any one of the 10 to start a new position when you come across a much better winner…or do you go with 11 and sell a portion from the others. How do you start and build each position. Let’s say 10 Positions again. Do you just buy 10K once conditions are met or does it depend on how confident you are in any given stock and build slower? How long would you expect it to build out the 10 positions, being fully invested in each one?

What $amount and positions would be appropriate for the Swing trades?

Thanks for the guidance and sharing your knowledge, hopefully I'll be better in a few months.

Tony

Tony,

Great questions!

If you have $100k or $100 million I do not believe we need to hold more than 10-12 stocks.  Typically, if the markets are behaving and we are fully invested 10 stocks at 10% is good position sizing.  Eight stocks at 12.5% or 12 stocks at 8.5% works also. Anything more than 12 stocks, we become our own mutual fund.

I would not sell a position to buy another position unless the stock was flashing a "sell" sign. We have already done the homework, and know we are holding quality stocks. When we trade around just to buy another stock that is performing better it usually works against us.

I use the analogy of being stuck in traffic, and your lane is not moving. But, the lane next to you is moving so you get over into the lane that is moving. Well, as soon as you get into the new lane it stops moving, and the lane that you jumped out of starts to move, and you want to get back into your original lane.

Swing trading is different because we only expect a 10% gain (hopefully) in a short amount of time. I only use swing trades when I see a good chart pattern ready to move.

Take SNAP from last week. If you bought off the 50sma (I did not) at $72 and it advances to $80 then you sell into that strength. Even though the stock looks setup to move higher. Swing traders are going to take their profits quickly as it met the profit goal.  If you can accomplish 10% trades your account will grow quickly. 

I hope this answers your questions. If not, please ask again!

Regards,

Marty