Here is something to build into that will counter the cyclical trades from the last post.
$BGS:
This trade give us Rvalue of 11.5 if you could hold this long enough to get to $50.
The more plausible price target would be the mid range of $35 which lowers our Rvalue to 6.25 which is still a very good risk of every $1 to reward $6.25 for position sizing calculations. For this trade, I have a 0.6% position size limit. So I would have to have a total loss of capital in a trade 167 times in a row to go broke…
So these draconian risk controls are because it is difficult to think how bad it would be if the markets were just closed for a long time, in which case the effective value of your capital is $0 if you rely on that capital to be there. The stock market is not like the physical means of production (the capital in capitalism) from which common stocks derive there value. So for me, this position sizing makes sense, to put me into the best position to hold out for something close to my ideal Rvalue, so I can hope to get the income I need.
I like it cause it means I am different- many would just hold what they have- exhibit risk seeking behavior. This way I can be risk averse and cool headed, in a hip way. Maybe I’ll be wrong…