Optimum amount of stocks for parttime trader. I have 34 stocks and etfs going but find it hard

ricbor

My thoughts are that 15 or so would be appropriate. But no less?

markd

My thought would be that you should not have more than you feel comfortable with. Too much stress leads to poor decision making.

For a longer term portfolio that you don't want to deal with everyday, diversification is supposed to help spread risk. One thing goes down, another goes up to balance it out. Diversification dilutes returns but also, supposedly, mitigates risk. It doesn't always work - someone called it di-worse-ification.

Fund managers want you to keep your money with them, so they advise diversification and waiting things out. There are tax advantages to that, but also risks, as when everything goes down together (crashes). It can take a long time to recover from a crash. But if you are a trader managing your own money you do not have to play by those rules.

If you are a trader, buying and selling short term, watching things everyday, you can go where the action is, as long as you can keep up with it. Your best protection against risk is to hold winners as long as they are winners, and dump losers as soon as they start losing. You are not a fund, so you do not have to be fully invested all the time. Sometimes everything is a winner, and you should be all in, but sometimes everything is a loser and you should be all out (assuming you are not trading short). In between, you can add positions as markets improve, and close them out as markets fall apart.

The main thing is to know WHY you want to be in a position. Get in when that situation occurs, and get out when that reason no longer applies. For instance, very simplistically, say you want to be in when the MA 50 is above the rising MA 200. That's your rule because you have observed yourself that's when you can make good money. So, get in when that happens, get out when it's not true anymore. (I'm not saying that's a rule to follow - it's just an example of a rule.)

I think the old timers' advice was, divide your capital in ten parts and follow your rules.

A book I think you can still get is "Trade your way to financial freedom" by Van K. Tharp. Highly recommended.

ricbor

Thank you so much for your thoughtful comments

lmkwin

How many are winning positions at the moment? How many are losing? If you lose your losers, how many positions are left? As markd mentioned the Van Tharp book, you also want to determine how many dollars total are you winning, how many dollars are you losing. You often can come out ahead with a low percent of wins, IF you do two things. Cut you losses short. Maintain discipline.