How much of a stock should I buy ? (how to calculate position size)
This is by far the most important question in investing. Just think about it for a minute. Your logic could be completely wrong about an investment and the stock price still can go your way for many other reasons. After all your investment can only go in 1 of 3 directions: up, down or stay "flat". Let's imagine you decide to buy an imaginary stock, lets call it "123". 123 is going through bad times but you read the 10k´s, 8Q´s, investigate the new companies president, interview customers and former customers, etc. And your conclusion is that they are going to be able to attract clients again at the same volumes that they did before, they are going through a one time solvable problem. Today the price of the stock is at $10 and you think that eventually (tricky word "eventually") it will get back to $60+, as they where a couple of years ago. " You don't trade the markets .... you trade your beliefs about the markets ." - Van Tharp