Trading Strategy: Protecting Your Account

[Dasein]

More of a strategy question than a T/A question, but it seems that this might be the closest fit (looking at older questions as well).

As a new trader, I am curious how others make decisions regarding protecting their trading accounts? When buying do you work off of a percentage of your account to go into a purchase with positive signs?

I ask because even as I look at Doc's tremendous history, there remains a few trades (e.g. CMGR, NUBL, as huge losses) a year that would have been catastrophic if someone went in with the majority of their trading account.

I have been trying to think ahead and consider how to trade in a way that protects the account. This is why traders opt for diversification. I would love to hear if people are following set rules/guidelines/percentages when entering a trade that has really good T/A.

Thanks in advance,

D.

[Dr PennyStock]

Divide your cash in three equal parts, use two parts to buy two stocks, reserve the other part to average down in one of the two stocks if really necessary, to catch a MOMO stock to make a quick buck, or as a reserve in case something goes wrong with one of the two stocks, to recover the account.

Do not buy more then $500 - $1,000 in triple or double 0 stocks, so if you lose all the money, the percentage will be 100%, but, you only lost $1,000, in one account with $10,000, it's perfectly recoverable in the next trade.

   

[cbenitez]

Divide your cash in three equal parts, use two parts to buy two stocks, reserve the other part to average down in one of the two stocks if really necessary, to catch a MOMO stock to make a quick buck, or as a reserve in case something goes wrong with one of the two stocks, to recover the account.

Do not buy more then $500 - $1,000 in triple or double 0 stocks, so if you lose all the money, the percentage will be 100%, but, you only lost $1,000, in one account with $10,000, it's perfectly recoverable in the next trade.

  

Dasein, great question. I've wanted advice on this since I've started trading (only 1.5 months in now). Doc, thanks for the response. I think it's good advice.

[Dasein]

Divide your cash in three equal parts, use two parts to buy two stocks, reserve the other part to average down in one of the two stocks if really necessary, to catch a MOMO stock to make a quick buck, or as a reserve in case something goes wrong with one of the two stocks, to recover the account.

Do not buy more then $500 - $1,000 in triple or double 0 stocks, so if you lose all the money, the percentage will be 100%, but, you only lost $1,000, in one account with $10,000, it's perfectly recoverable in the next trade.

  

Nice answer. This is VERY helpful. I was thinking in thirds, but was considering at having three primary trades in play at a time. Holding a third for ave down, etc. is helpful.

Thanks Doc.

Wondering, out of curiosity, do others have different strategies?

[RoagTrader]

LOL I'm a RoagTrader so I won't give any advice!

[Smitty]

What he said!!!!.....

[jmedic1]

Looks like I need to make an adjustment....well, maybe when ATRN is moving up...lol