I wish to ask some questions about starting to trade.
For 2 years now I have studied options trading which have learnt a lot of theory about options and risk management of trading options.
I do feel that I would like to start trading stocks before I venture into the options market but I have little idea about money management when it comes to trading long stock positions.
Letís just say I had a $40,000 account I have the following questions.
1. How much of this capital should a trader have active in positions at any given time 100% 80% 40%? I really don't know if having some of the account in cash is the right thing to do.
2. How much of the account capital would be sensible to place in any given trade IE 3% 5% 10% ? I donít know what is a good position size for trading long stock positions.
2. And finally how much of a drawdown on ones capital would be considered sensible amount before cutting your loss on a trade.
Maybe someone has a simple formula for calculating a stop loss on a position or even a way to figure out how much of a given stock should be traded.
I am very keen to start trading and would really appreciate some idea on money management that other members use them selfís