watch out tomorrow..., page-28

re: watch out tomorrow...to mack67 Depends on your kitty. Aim to lose no more than 2%. In other words, look at the worst thing that could happen and take a position so this is no more than 2% of your kitty

One common way to do this (Turtle) is to find out the ATR of the stock, and then take a position N so that

N = Y/(ATR*100).

(with Y = trading funds) and set your stop at 2*ATR.

For example, a stock like NAI has an ATR around 1c at the moment, so with a $20k kitty you can buy 20000, with a $100k kitty you can buy 100000.

This works best for midcaps. For most specs in the 10-20c range (which is the most dangerous because the price moves by 5% per level) this is probably too much and I would take half that amount.

If you are very adroit and think you can get out intraday without taking much damage, you can take bigger positions.

There is also the problem of stocks which are thinly traded. You have to take smaller positions on these or risk being stuck with the loot when you need to bail. This is why I mostly buy heavily traded stocks (600k per day plus)