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How Many Shares Should I Buy?

 
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ChickenHawk



Joined: 24 Apr 2005
Posts: 247
Location: Houston, Texas

PostPosted: Mon Oct 09, 2006 10:18 pm    Post subject: How Many Shares Should I Buy? Reply with quote

While scanning for stock picks to buy I found myself asking:

How many shares should I buy?
What would be my breakeven point for a quick sell?
Does it really matter how many shares I buy ...100...400...500...1000?

As a trader with Scottrade ($7 in and $7 out) it made better sense to put all the costs upfront ($14.00)! This reduces the need to refigure my Profit margin (or Loss) each time I buy and sell. The same strategy would apply to selling! After all, minimizing losses and maximizing profits is the name of the game Exclamation

The end result are the charts below that I wanted to share with my fellow candlelites. I built the chart in Excel, and for the Long Stock Price (BUY) it was an awakening experience.

Sure, I would buy 100 shares here and 400 there, but I realized that a few cents lost here and there over the period of a year can add up quickly. I now follow the chart and have made my trading just a little more efficient and have fewer headaches.

The only criteria I need to enter is the price of the stock Exclamation

Below are two sample charts shown to give you an idea, one for a $1.00 BUY and one for $10, though it works the same for any price.

Give these charts a little study and you will see what I mean.

Happy Trading Very Happy



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candlestick1
Site Admin


Joined: 27 Jun 2004
Posts: 503
Location: Houston, Texas

PostPosted: Tue Oct 10, 2006 11:04 am    Post subject: Amount of shares Reply with quote

The best money management system I have found is buying equal dollar amounts for all positions. If I have a $1 million account and plan to have 10 positions, each position is $100,000. That takes the emotions out of what to do with each position.
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drunnels



Joined: 09 Feb 2006
Posts: 23

PostPosted: Tue Oct 10, 2006 4:00 pm    Post subject: Keep risk the same Reply with quote

If your $10k positions routinely offer about the same amount at risk, then it's pretty the same as what I propose. (and a lot easier than this)

Risk the same percentage on each trade.
2% or less of your portfolio at risk.
Let's say you have a $100,000 trading account.
2% is $2000. Find your stop, subtract it from your entry price, divide that amount into $2000. That's how many shares you can buy.
Each and every time you trade, risk the same percentage.

example:
$30 with a stop at 28.50 (5%).
2000 / 1.50 = 1333 shares
round to nearest 100. 1300 shares @ $30 = $39,000 with $1950 at risk.

Many people with smaller accounts use 2%. I would probably use about double this position size with a $1M acct. about 0.5% risk.

I've been recently daytrading a smaller acct than this @ 0.2% risk per trade.
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russjackel



Joined: 16 Sep 2005
Posts: 59
Location: niantic ct

PostPosted: Wed Oct 11, 2006 1:55 am    Post subject: drunnels Reply with quote

Think i will go with chickenhawks break even chart thanks chicken hawk once again for your knowledge. drunnels not to burst your bubble but under your example what I disagree with is the numbers. If it was a perfect world which it is not and especially when it comes to trading if you buy 39000 of a stock with a 100000 account you have 39% of your account invested and at risk. I know that you say you have 1950. at risk with your stop. I will give an example I bought RHEO on 2/1/06 @ 12.55 and put my stop @ 12.05. On 2/2/06 my stop was executed on open at 3.66. I know this is extreme but I have had it happen before and this was an actual trade in my account Embarassed So useing your method how much of my 100000 account would I have left to trade. I say if you have 100000 do as candle1 suggests and divide it into 10 trades of 10000 each. It also is nice that chickenhawk showed the table to show what is your best break even. On line trading is so sweet when you only have to gain 10 to 30 bucks to be profitable on a trade as opposed to the old days when a full service broker charge 60 + each way on a trade and you had to rely on them for info Very Happy
Hope all your trades are winners and goodnight
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drunnels



Joined: 09 Feb 2006
Posts: 23

PostPosted: Thu Oct 12, 2006 1:58 pm    Post subject: Reply with quote

Good example Russ. I too have had something similar happen.
It was just an example. When it happened to me it was a 30% overnight drop, BUT I didn't have 2% at risk. In fact it was a $3500 positon in a $100k acct.
Nobody in their right mind is going to hold 40% of their acct overnight in one position. I frequently put on larger percentages of my acct for intraday periods with MUCH less than 2% of my equity exposed.

We're on the same page, just a bad example on my part.
Use a smaller percentage of your equity at risk then. The point is to risk the same amount each time, not bet the same amount.
If the upside is identical, but the downside is not, why bet the same amount each time?

Good trading.
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