Thursday, March 4, 2010

Still need to work on holding period definition

So as I mentioned in the earlier blog, this weekend I am going to spend some time coming up with a business plan for my trading. It is basically still going to be a work in progress. But I want a formal document with the rules of my trading system as well as the imposed limitations that I have placed, all part of a larger risk management system.

One thing I am going to seriously think about is my holding period. I think I have made some progress as far as reducing my holding period expectation for many of my positions but I still have some ways to go. Today was a perfect example when I closed out my position in AZN which I had identified on the original post as a 2-8 month holding period. Two months is just such a long time let alone 8 months. I still need to figure out what the ideal holding period is for me.

So far the longest I have held anything for is about 2.5 months. So maybe I set trades up with a holding period of 1 day to 3 months and on occasion 6 months. I really just don't see any reason for a trade to go beyond 6 months, beside the fact that I am not sure I could hold onto something for that long. I will keep these things in mind this weekend.

Right now my average holding period is about 11 days. But I do have a few positions that I held longer.

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