How to Add Stocks to a Monetized Position
Suppose you have a stock in your portfolio that has increased by 30%, which forms a cardinal or merge into a moving average, and you want to add to that position . What would you do?
I have several ways to approach this situation. Some of you may agree that some of you may disagree with my pyramid or my position as they confirm the uptrend way after my original entry. When the market was weak and the NH-NL ratio could not confirm the bull markets of 2005 and 2006, I was cautious when entering a new high. Suppose that I will use a $ 100,000 portfolio and round numbers to keep a simple example, although the CBG position is explained in detail based on a real position.
If I start researching the stock and feel it will move from $ 60 to $ 100, I will determine the maximum position that can be assumed from a simple position size calculation. If I'm sure I can handle an 8% decline, I can buy 208 shares at $ 60 per share (in this case, I would normally buy 200 shares). My position size will be $ 12,500, with a maximum downside risk of $ 1,000 or 1% of my entire portfolio. My stop will be at $ 55.20 or just below 8% of my purchase price for a particular support area. If the stock breaks through a particular pattern, such as a handle of the cup, I will buy half my position when breaking up, and after a few days confirm the trend after the other half.
If the stock is a fixed upward trend rather than a recognizable pattern, I usually buy a 2/3 position when I see the opportunity and then follow up the remaining 1/3 (After the stock reaches a minimum gain of 25%).
Other times when market behavior is healthy and the NH-NL ratio is strong, I will base my 1% Location-size model, and re-evaluate the situation later. Using the most recent example, I added $ 40 to the CBG and then re-adjusted my position model to 1.5% (the data could be tricky because the price has changed and my portfolio has different values). I've never gotten so much detail in a simple blog post, but I guess it's better than ever. This method is my own, so you will not find it anywhere, it may or may not attract everyone.
Here is a real example of using the actual stock price, but the portfolio size has been changed to keep the calculation simple and keep my own activities cautious.
When I first purchased CBG, I took the entire 1% portfolio risk and was not sure whether I would add stock in the future (this was not my concern at the time). I liked the stock and thought the 15-week pattern before my purchase was picture perfect (especially since the correction was supposed to be in the previous uptrend from the IPO date). I issued a market order on June 1, 2005 at a price of $ 38.97, with an overall risk of 1%. The stock has been covering the MSW index since May 21, 2005, at $ 37.20, but I'm looking for a break above $ 39. I used $ 39 to buy me $ 12,500 or 321 shares (my order was filled at $ 38.97 = $ 12,470 for 320 shares). Immediately after my position, the stock was reversed, but I kept the investment as it did not violate any sell signals and then looked at it as it quickly advanced to the $ 40 range, approaching $ 50. The stock was consolidated over the next three months and the MSW index was bought at a higher bid price of $ 50. The resistance line was hit multiple times, so I decided that if the stock broke above $ 50, I would add stock to confirm the volume.
It turns out that when the stock started to make a significant merger in the fall of 2005, I did add stock. I increased the stock at $ 52.68 on November 2, 2005 (a little more than I wanted, a very powerful move that day). The stock slightly hesitated in the next few days, but never violated the new support line of $ 50. Within six weeks, the stock moved to $ 60 per share and I felt comfortable. So, how many shares did I buy and how do I determine the size of my additional positions?
When the pyramid, I have been taught by my father to take a smaller position than the original purchase. In this case, my portfolio has grown about 10% since the summer so I decided I could take another 0.5% risk on CBG (total risk 1.5% – my maximum risk at any one stock cap for me 2% of the entire portfolio). When running a new calculation, my portfolio size is $ 110,000 (hypothetical value) and the entire position risk factor is 1.5% or $ 1,650.
I used a $ 50 price risk factor of 0.5% (half of 1%) and stopped 8% (usually my calculations) which gave me purchasing power of $ 6,875 or 138 shares. I bought another 130 shares and added them to my original position 320 shares, a total of 450 shares, for a total cost of $ 19,318.80 (minus all fees, etc. …). Now, to see how it works (it's not always good to work, but this time I keep the number circle): Use the position size calculator; insert the portfolio worth $ 110,000, risk 1.5%, stop 8% The average cost basis is $ 45.83 (($ 38.97 + $ 52.68) / 2). What did you get? Amazing: Target size is $ 20,625 or 450 shares. I currently hold 450 shares, which is slightly lower than the maximum calculated in this equation ($ 19,318.80).