The Case For Going "All In"

[Wall Street Forum]

Attention: This strategy should be employed by traders with smaller accounts (under $5K) as a way to build their account size. As your account gets to a bit more significant level (over $30K) you should start to diversify your trades(holding more than one stock at a time). I began trading with $1700 so I had to trade using the "All In" method. There was just no way that would have worked in the long run. Going all-in with a small account can really amplify your results. When your account is larger its more important to protect capital than get HUGE returns. A large account can get HUGE returns on its own even while diversifying.

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In the world of novice trading, especially when it comes to stocks, there is always a persistent and bugging question as to whether you should diversify your capital or just find the BEST of the BEST stock and go all-in with your money. By going all-in I literally mean using every dollar at your disposal to buy the stock you think has the best chance to win.








All-In one stock at a time:

Pros

• Huge single trade gains
• Your full cash reserve can be used and isn't on the sidelines of the market collecting dust

Cons

• Can be mentally exhausting when a trade goes against you
• Requires a lot of "testicular fortitude" to stand strong in positions when your account size grows to a "decent size"

Overall I am a fan of going ALL IN with my trading capital. It just helps you grow faster. The one caveat I will add is that with this strategy you definitely need tighter stops for swing trading. Don't trade this way if you plan on having stop-loss orders 5-10% away from your entry or further. Your account would get absolutely decimated in no time.

This method definitely requires the "cut losses short, let gains run" adage to be applied.



Each method has its purposes and we even have a full article on the benefits of diversification that you can read here.


Here are a couple of threads on the Elite Traders forum about diversifying:

Do you diversify as a swing trader given commission fees etc?
How do you diversify your trades?

[Stan1]

Whew, all in?
That is directly opposed to my system, no more than 2% on any given trade is at risk.

Risk management is a critical component to trading I think. That's why everyone blows up their accounts.

How do you determine your stops? Trades almost always go against me before they turn profitable. Have to leave room.

[Wall Street Forum]

Whew, all in?
That is directly opposed to my system, no more than 2% on any given trade is at risk.

Risk management is a critical component to trading I think. That's why everyone blows up their accounts.

How do you determine your stops? Trades almost always go against me before they turn profitable. Have to leave room.

You are absolutely right. I don't lose much more than 2% on any given trade if I can help it.

When I say go ALL IN i mean using your whole account size per trade. That's how I got my start. You have to realize that I started trading with $1700 many years ago and diversifying my capital wouldn't have made much sense after you factor in commissions. I started with a broker that was 20 bucks roundtrip per trade.


And yes giving your stocks breathing room is critical to success in the markets.

[Stan1]

Ahhh, yeah, I mis understood. All in as in full position size.
That's much more sensible.
Thanks for clarifying.

[KDcain]

Whew, all in?
That is directly opposed to my system, no more than 2% on any given trade is at risk.

Risk management is a critical component to trading I think. That's why everyone blows up their accounts.

How do you determine your stops? Trades almost always go against me before they turn profitable. Have to leave room.

yeah, you might be missing the point. I also like going all in with enough breathing room for each trade and around a 2% stop loss. I don't think WSF would recommend anyone do something foolish with their money in the market like blindly hold a stock until you're 10% in the hole. That's just bad math.

Cheers

[Stan1]

Yup, got it thanks.