≈ Increase size vs. increase frequency≈
We all want to make more money. But reaching for faster profits can often result in too much risk and ultimately significant losses. If you think through your options to a bigger payday, you’ll discover there are two paths.
The first involves increasing your position size. Instead of buying 100 shares, buy 200 shares. Instead of purchasing one options contract, purchase 2. Let’s say you made $1,000 in August. Do you know what you could have done to double your gain to $2,000? Double the size of each bet.
The second path involves increasing the frequency of your trades. Say you have a system that makes $100 on average per trade, and in August you made ten trades for a total profit of $1,000. What could you have done to double your profits? Double the number of trades from ten to 20.
Of these two routes, which do you think involves less risk?
Doubling your bet size is fraught with danger. It will juice up your emotions and make it more challenging to follow your plan. Additionally, the drawdowns will be much more painful.
Faced with the choice of managing many small positions versus a few big ones, I’ll take the former every single time.
Chart of the Day
International Paper (IP)
International Paper (IP) is lining up nicely across multiple time frames. The weekly chart is on the verge of triggering a bull retracement. And the daily chart is itching for a breakout over $60.45. Volume patterns are also leaning bullish over the past month.
Video of the day
Buy One, Hold One, Dump One
Coach Greg analyzes 3 stocks from the Communications Sector – ViacomCBS, Fox, and Comcast – and asks the coaches which one they would Buy, Hold, and Dump, in this segment from Thursday’s Halftime Report
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