Simple inventory management method
Some friends may be curious about the different leverage I use for each entry signal I post:
Why do some stocks take profit and stop loss of 20%, while others only 5%, or even 3%? How exactly should the money be invested?
Here's my own position management method:
Many times, a trading strategy will have many trading opportunities at the same time, and investors with more experience will spread their funds among different trading opportunities, thereby reducing overall risk.
The safest approach is to make every trading opportunity the same risk: for example, you can use 1% of the total asset profit and loss risk as the standard for a single trade. Then it is possible to calculate the leverage ratio that should be invested. Here are two examples:
1. The profit and loss ratio of a trading opportunity is 1%, then 1% ÷ 1% = 100%, so the capital leverage ratio is 100%, which means that this trading opportunity requires 100% investment of total capital.
2. The profit and loss ratio of a trading opportunity is 20%, then 1% ÷ 20% = 5%, so the capital leverage ratio is 5%, which means that this trading opportunity requires an investment of 5% of the total capital.
The two examples may seem to have a huge difference in investment, but in reality, the risk is just as great. For ordinary retail investors with 100,000 or millions of assets like you, this position management method is the safest, most stable and effective. However, fund companies have large capital pools, often use more comprehensive strategies composed of different trading strategies, and have more diversified fund management methods to balance overall risk.
The road is simple. The greatest truths is always the truth. (There may be a translation error![]()
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I wish everyone the best of luck with your investments.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Start: 16/04/2024
KC strategy
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