![]() ![]() Your stop is then worthless, because what happens often is that this is just a shake of the algoritmic trade, but your stop is executed at 37 USD. In the after hours the news breaks and your stock gaps 20% the next day. ![]() So you sit and wait, and your 50 USD price goes down and down to 46 USD, where it closes for the day. Very often unfortunately, if there's something negative that is due to come in the news about the company, the price slowly starts to fall, before the news comes public, due to the fact that there are always people that know it before you. So based on the system you need to buy 1.000 : 5 = 200 shares, but the price is 50 USD, so you end up buying 10.000 USD in shares (or 20% of your portfolio is now in just 1 position). So you pick a position, that is not very volatile and decide your stop is 10% of the entry price. The whole R concept is flawed, and unfortunately lost me a lot of money to understand it.Īccording to the system, if you put 2% of your portfolio at risk per position (say 1.000 USD per 50.000 USD portfolio).
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