I am an engineer (35) which just recently got opportunity to trade (3rd world country and lots of sanctions). Last year I have been working 16 hours a day … I have read tons of books from different people about different techniques but these 2 had major impact on my direction. I got familiar with your work from your podcast especially the one with Parker got me (I did not know him at all before). Then listening to market wizards and Richard Dennis made me to think on the strategy. Started to program and did a little bit of back testing and saw that 20 day break out, indicates almost most of my good trades during past year and even better. My problem for now is about strategy itself, I think, I have some ideas about entering the trade but there are some questions:
- There is great focus on diversification. Could we claim that being in the stock market, but trading different groups is same as trading in different markets?
- It seems that position sizing is about future markets, but I am not sure if it is valid for stock markets as well?
- Stop loss of 2 ATR is quite huge which kills the size. If a stock in 20$ has 1.5 ATR then if I want to risk 1000$ it means (with 2ATR risk) around 6K$ which is relatively small size. Should this be adjusted as you indicated in your book?
Thanks for reading this email and thanks in advance for any help.
Thanks for your note. Two big points:
1. Un-leveraged stocks alone is a difficult path. Why do you want no leverage?
2. Stocks are often highly correlated. You need to assess correlated markets.
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