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Progressive exposure and Position Management when on Margin

QuestionsCategory: QuestionsProgressive exposure and Position Management when on Margin
zr7hjo asked 2 years ago
Hi Pat,   The current market is sloppy but it is ultimately setting up for a big uptrend which I am really excited about. To fully capitalize on this up leg, I am considering margin.   How do we should we use margin within the context of progressive exposure? Assuming a cash 100k ac, which on full margin would be 200k. For simplicity, assume we are aiming for a 10 position portfolio.  On the pilot buy after the FTD, how big should we size the position? Should the goal be a 10k or 20k position?  If 10k, we would scale in via 5k, 3k, 2k in 3 different buys, if 20k, we would scale in via 10k, 6k, 4k entries. Since it is a pilot buy, there is always a chance the market is not ready yet,  and the trade might fail. Wouldn't sizing it 20k on the assumption that we are going on margin from the outset be too aggressive?   If we size the pilot buy at 10k, and after gaining some profit cushion, perhaps the second trade can start with a 20k size on the assumption of margin?  And when you are on margin, how do you manage risk? Instead of the usual "sell 20%" on weakness, should we bump it up to "sell 40%" on weakness? Apologies for the long question, I am confused as to how margin and progressive exposure work together.  It would be great if you can provide some examples on how you handled it during the 2020 covid lockout rally.  Thanks
1 Answers
Avatar photoOwen Staff answered 2 years ago

Hi Peter,
Pat made this video for you...