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Portfolio Heat: will it save your bacon?

Discussion in 'Stock Market Nuts and Bolts' started by Zaxon, Aug 7, 2019.

  1. willoneau

    willoneau

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    I believe portfolio heat is not relevant with fixed fractional risk management.
     
  2. Zaxon

    Zaxon The voice of reason

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    Portfolio heat is defined the same in both short and long trading styles. The difference is how they see Capital at Risk.
     
  3. Zaxon

    Zaxon The voice of reason

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    To some extent that's correct. It's capital at risk that matters most. But some people also place an upper limit on portfolio heat.
     
  4. willoneau

    willoneau

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    Totally agree, Capital at risk is either with open positions value or not.
     
  5. willoneau

    willoneau

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    I would say those that probably don't use fixed fractional risk.
     
  6. willoneau

    willoneau

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    % Capital risk would, also very relevant if that % risk varied between positions.
    I would be watching portfolio heat if I was scaling in.
     
  7. willoneau

    willoneau

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    I believe portfolio heat only has relevance if you use open position Capital Valuation to determine your next entry size, IMHO.
     
  8. Newt

    Newt

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    Hi Zaxon,
    Re-reading Pete's posts, what I'm calling Open Profit-Open risk sounds like what he's calling Portfolio heat (open profits/loss versus current trailing stop).

    I try to focus on profit/loss of my trailing stop values rather then get excited if open profit suddenly spikes - its a psychology thing. Its not currently an integral part of my system.

    Average holding period is just under 6 months for winners. I'm fussy about entry criteria and prefer to hold on for long term trends rather than jumping in and out a lot. There are tax benefits too if you can't get a nice profit held >12 months. Once the trend has clearly failed, I'm out though.
     
    aus_trader, willoneau and Skate like this.
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