Caspian101
5 posts
msg #121393
- Ignore Caspian101
modified |
8/25/2014 4:16:19 PM
An important part of being a successful trader is not risking too much of your portfolio on any one transaction. A rule of thumb that I have seen is don't stand to lose any more than 2% of your overall portfolio value on a trade.
We can limit losses on trades by using stop loss or trailing stop orders to sell if the price falls too far. This filter uses the 'Average True Range' to measure the volatility of a stock and where you would need to potentially set your stop orders. It then uses this information, together with your overall portfolio value and the previous close stock price to calculate how many shares of a stock that you can buy to stay within your risk tolerance.
Please note that the filter does not take account of trading costs or commissions.
Hope you find it useful.
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