Small position size is the major savings grace with highly speculative stocks like KDR, AGY, and AVZ. These stocks are all in strong downtrends just like most of the ASX lithium sector.
I allocate between 5 to 10% of funds to speculative shares. With 5% allocated out of a nominal $100K trading account, only $5,000 is at risk. If the stock drops 20% below the purchase price, which is normal for a lithium stock, only $1,000 or 1% of total trading capital is lost. This is an acceptable loss.
Emotional trading, revenge trading, excessively large position sizes, no stop losses, and trading against the primary trend, ultimately is a one way ticket to blowing up a trading account.
The following is an example of how quickly a trading account can be destroyed by placing all funds on single speculative stocks:
20/2/2018: buy AVZ at $0.30. Account size start $100,000.
08/6/2018: sell AVZ at $0.10. Account size: $33,333.
12/6/2018: buy COB at $1.18. Account size: $33,333.
05/7/2018: sell COB at $0.65. Account size: $18,361.
05/07/2018: buy KDR at $1.75. Account size: $18,361.
16/07/2018: current KDR open balance: $17,049.
The initial $100,000 trading account has lost 83% in almost 5 months of trading. This figure doesn't even include brokerage costs. It would take a 587% return in order to just break even.
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