On Saturday I calculated my total portfolio risk based on my adjusted rules:
- trade must be larger than $800 to lower the cost ratio when buying stocks
- existing positions must be positive
- or the total current risk exposure to stop loss must be less than 3%
- or the total liquidation value of the portfolio must be larger than $2,000
Based on this I could open a new position without risking too much if all open trades turn against me. Previously I calculated the above conditions wrong and when all trades turned against me in January 2010 I lost almost 21% of my portfolio. With these new rules I shouldn’t lose so much anymore.
When calculating new risk I am looking at what my portfolio will look like WITH the new position if all turns against me.
Based on those rules I evaluated the following stocks:
AKAM, BRCM, CPO, HGR, MWIV, OTEX, PTNR, THS,
From the stocks above only Open Text Corp. (OTEX) was barely able to pass my further scanning and meeting criteria. It scored as a moderate buy candidate, creating new highs, however it didn’t pass my other criteria. By buying this stock at this time would increase the risk of my portfolio to almost 6% and drop my total value below $2,000. I decided not to buy at this time and stay aside unless a new candidate shows up. I also will need to save and deposit more money to allow new purchases.
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