Position Sizing to Maximise your Stock Trading Returns.

Of all of the facets of stock trading, one of the hardest is deciding what size position to open. Unless you are employing an exactly mechanical system that explicitly outlines your trade size, figuring out precisely what proportion of your hard earned money to 'put on the line' can be incredibly tough to choose. Rules of thumb like 'never risk more than five pc of your portfolio' are fine, but may leave you in the dust on fast moving days. As we here at stock trading would say, timid heart never won fair woman, yet look before you jump. Often , what looks like a typical trade starts to run away as the stock exchange climbs, and you finish up wishing you had taken a large position. Known as the 'Kelly Formula', this is a helpful little equation that's easy to appreciate, and faster to apply. Replacing the figures into the formula, we have:-. The Winning % ( or 'WP' ) is ten / fifteen or zero.

However as with all option trading systems, there are pitfalls that you'll need to avoid if you are to be solidly worthwhile.

Here are some tips that will help you write covered calls successfully.

A great resource for viewing elemental 'ratings' for stocks is at day trading shares .

Don't enter a Covered Call trade because the option premium looks fascinating.

I actually target the bigger, more liquid and stable corporations with monthly call option premiums between the 3-6% range.

One of my private tops and a stock that I've had substantial success writing covered calls on over time is Oracle ( ORCL ).

Don't misunderstand what I'm saying, it could also be good time to be a stockholder if the takings numbers are truly great, but I am a touch more conservative and to me it is not worth the danger. You can always buy back in later anyhow.

Always have a look at stock charts when selecting a stock to scribble covered calls on. One las! t note - this subject relates to 'Expectancy'.

Trader Jack likes to scribble for day trading information - the free stock trading site from traders Initiative helping traders get to cruising speed fast.