This post is for trend followers and how to manage their money for trades. There is another article on portfolio allocation in an earlier post.
This suggestion on how much money to place per trade is made in comparison to the easy investment plan or regular subscription plan offered by certain broker. In the easy investment plan, you put in a specified amount of money to buy stocks of a certain company on a designated date. In this new sandbagging technique, ZF suggest you have four tranches/slices or periods to invest more in stocks. Two or three tranches are also acceptable but one tranche is risky.
Once you decided on the number of tranche, you decide to place your money
- Equal tranche: first half on the first breakout, and the 2nd half on the next
- Pyramid tranche: lower the price, the bigger the volume or budget
ZF continues:
The inverse pyramid is usually done when selling. The higher the prices go, the bigger the volume
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