Trying to Figure Out Minervini Risk Management

Discussion in 'Risk Management' started by excrypto, Nov 7, 2024.

  1. excrypto

    excrypto

    My question comes from the picture attached. Which is the better risk mgmt system for swing?

    I use the first method outlined. That's how I was taught to trade. Is a fixed $ amt risk and using "R" to take profits. I used what Minervini outlines in his workshop to come up with 1% of account risked per trade. From there I always do the calculation of $risk/Stop loss distance= number of shares. I usually keep my stop loss sub 8% from entry point just to stay within his methodology. I don't feel the need to though because if I go up to 11% stop for example my $ risk will stay the same Ill just get less shares.

    Mark uses the second way of managing risk and when times are tough he tightens stops to lets say 2% from 8%. This effectively reduces his risk. I see two problems with this way of doing things.
    -First you have to know beforehand how many stocks youre planning on having because you need to know how much buying power to assign to each stock. For example 13% BP if youre doing 8 stocks. Problem is you might not actually trade 8 stocks therefore leave buying power on the table. (All of this assuming youre not dipping into margin)
    -Next problem is that there are examples in which the buying power required for a setup could outstrip what youre alloted for if you have a large amts of stocks youre allowing yourself to trade (lets say 8) and therefore only allowed 13% BP per stock and have a tight stoploss (1% for this example) you might require over your 13% allotment. (Example of this briefly outlined in the middle of step 2 in the picture.)

    Last question would be how would I go about risk reducing with my system the same way mark does in his. Instead of just taking less shares he actually moves up the stop loss zone giving the stock less room. Should I do the same or just reduce shares taken from 1R to like 0.6R for example?

    He also uses % instead of "R" to take profits. I dont understand why his system is better than the system ive been taught to use. I have really tried to re-read all the course mat'l and anythingof his in the books to understand why this method. What am I missing?

    Edit- link for the whole article not just screenshot here: https://tradethatswing.com/how-much-stock-to-buy-how-to-position-size-when-swing-trading-stocks/
     
  2. MarkBrown

    MarkBrown

    ask yourself do you know what you're doing?

    if so why trade stocks? it's a mess just trade futures be done with it. trade one market and do it well.

    do something like for every 4k each contract profits add 1 contract and never back down size.

    otherwise many people fail cause they get things to complicated without the experience to do so.
     
  3. excrypto

    excrypto

    Mark, do you wanna catch hands?
     
  4. MarkBrown

    MarkBrown

    [​IMG]
     
    SimpleMeLike likes this.
  5. excrypto

    excrypto

    damn rights you are. this is hallowed equity only trading ground here.
     
  6. tomkat22

    tomkat22

    I dont waste mental energy thinking about my buying power. I glance at it occasionally but dont let it affect any aspect of the trade. There's other more important things to worry about on any given trade. Minervini would be more helpful if he would crunch the numbers on all trades he's made and find out what the average percent is that he stopped out of trades gone bad. Is it 8%? 11%? 16%?
     
  7. excrypto

    excrypto

    he says its 3-4%
     
  8. tomkat22

    tomkat22

    You sure about that? That sounds more like a Scalper's stoploss than a Swing trader's stoploss.
     
    taowave and MarkBrown like this.
  9. excrypto

    excrypto

    Yes I am. I just did his Master Trader Program.
    Alas I am yet not a master trader. Not sure what went wrong...
     
    taowave likes this.
  10. deaddog

    deaddog

    I reduce the size of my initial position so that I risk less per trade. Instead of risking 1% I'll risk 0.75 or 0.5%. If the stock moves like I expect I can scale in.
     
    #10     Nov 7, 2024
    MarkBrown likes this.