Ask Colin

I just wanted to thankyou for a very rewarding weekend at your seminar. I started off wondering if I would understand any of it but ended up coming with a head and notebook full of useful information. I can already see my first problem - having only $15,000 in equity if I apply your 6% equity rule and 1% stop loss rule I am going to have to buy small parcels and sell them at almost the smallest fall. Do you have any ideas in this regard?

Thanks for the kind words about the seminar.

With small capital as you have, you cannot work my method. You will have first to save more and/or build it up through trading.

The problem you have is that you are going to have to take more risk - both through less diversification and a higher % risked.

I suggest you divide the $15k into five lots of $3k or three lots of $5K, depending on how much risk you want to take.

Then try to find entries where your stop loss is close, rather than the sort of ones I would take. That way, you may be stopped out more often, but your losses should stil not be catastrophic. This probably means trying to buy corrections, with a stop under the low of the correction once you think it has turned up. Seeing a short term reversal signal (we teach them in E114 Technical Analysis at the SIA, or see my achived articles on Ozemail Stockwatch or in the ATAA Journal back issues - there is a CD ROM) or a bounce off support. Another way is to use something like RSI to pick dips in a trend.

As I say, this is going to mean being stopped out quite often, but you have to accept it to preserve capital.

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