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choosing positions and maximum position count

QuestionsCategory: Questionschoosing positions and maximum position count
Wes Miller asked 4 weeks ago
First, I want to say that I appreciate what you do. I have been following you on twitter and watching all your youtube videos. I decided to bite the bullet and join your VIP group to learn more. I have been trading for a while now and fully believe in the O'neal way of trading. Your spin on it has taught me a great deal already. Anyway, I do have one question that I struggle with. How do I decide which stocks to take? I want to own no more than 10 and preferably 5-8 at a time. With all the ones you offer on your list and the setups that I see, I could easily double this number at certain times. How do you decide when to pick up another stock instead of adding to one you already have and/or how do you decide which stocks to take when you still have cash available? Am I thinking about this wrong? Should I be willing to invest in more and cut my sizes? Thank you for any information you could give on this.
1 Answers
Avatar photoOwen Staff answered 4 weeks ago

Hi Wes, Pat made this video for you:

Hey Wes, this is Pat Walker from Mission Winners. First off, I want to sincerely thank you for being a VIP member. I genuinely appreciate it, and I mean that. I try really hard to help and take what I do very seriously because I respect you and everyone in our community. This business is tough, and my goal is to make it as understandable and approachable as possible.

You've been trading for a while, and I can relate to your journey. Bill O'Neal changed my life. I had the privilege of sitting down with him twice over lunch, and I told him how much he influenced me. When he passed away, it was a sad day because he was a hero to me, both as a trader and as a person.

You mentioned struggling with deciding which stocks to take. That's a great question, and I'll answer it directly: Focus on clean and simple flat base breakouts. Commit to mastering this setup. Don’t get distracted by fancy, complicated patterns. Just stick to the basics – simple base breakouts. Trust me, it works.

Look at examples like Eli Lilly. That simple base breakout with volume – that’s what you want. Always ensure the stock is in a leading group, has a great base, and a high composite rating, ideally 90 or higher. Most of my MarketSmith screens filter for a composite rating of 90 or above, sometimes 88 to catch those that might improve during the week.

Regarding how many stocks to own, five to eight is plenty. Only go up to ten if the market is really strong and you have a good profit cushion on your current holdings. Focus on the simplest bases because they’re easy to see, which increases the likelihood that other investors will also buy, creating momentum.

The stocks on the Key List™ are vetted, and they have the best numbers. Trust in those selections. Focus on simple base entries. Don’t own too many stocks – eight to ten is the max. And always monitor them closely with alerts set up on all your stocks.

For position sizing, take your total account and divide it by eight or ten to determine how much to allocate to each stock. For example, if you allocate $10,000 per stock, start with half of that ($5,000), then add $3,000, and finally $2,000 if the stock is performing well. Master this incremental approach and never add more unless the market and the stock are both doing well.

Remember, start small and build on your successes. Ride the trends and always control your risk. I hope this helps you, Wes. If you have more questions, don't hesitate to ask. Let’s keep working at it, and thank you again for being a VIP member. Let’s keep moving forward together!