Sunday, March 27, 2011

Managing Risk like a professional

Gil Morales, a practioner of CAN SLIM trading strategy , whose personal account return was
10,904.25% between January 1st, 1998 to December 31st, 2005, has a simple policy for managing risk:

"I have very few eggs in my basket, first of all, and I watch them very carefully! I use a standard stop-loss of 6-7% on any initial position, and once I am up 20% or more on a stock, I never allow my average cost to get to a point where the stock is not trading at least 20% above that average cost. If the stock starts coming in, I trim any portion of the position I purchased at higher prices to bring my average cost down and bring the position back in line with respect to my average cost. I use a LIFO method of accounting to keep track of my cost basis."

Full Interview:

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