lithium wrote:hi millionaire!
How he size his position and calculate his risk and reward? Thanks a million. Hope you can reach billion soon.
Lithium san,
There are several position sizing articles in the book, its best to pick up that book from the library to have a better understanding.
A simple method is the P=C/R method
C = Cash and R is Risk.
Say you have a $30K portfolio and you want to risk only 2% of that, that will be $600. For a stock you are eyeing at $50, you have a risk of $5/share.
So your P = 600/5 = 120shares at $50/share.
R will be your risk you are willing to undertake. Typically it will be 1R in risk but your reward will need to be at least 2-3R to cater for the occassional (or frequent) losses.
I would not do the author justice if I only touch on the surface here, nor will I help you in any meaningful way if I don't provide the context of the position sizing and risk/reward multiples covered in the book.
The book is available from the library.
Cheers,
mm