New Investor With Small Amount of Money

[rsliu]

This is a good point. I am actually interested in speculating, not investing.

[ChromePony]

I think the problem that people are trying to point out is that by the time you read the paper and go to purchase or sell stock the market will have already reacted to this new, therefore eliminating any edge. The billion dollar investment firms have access to this information long before you will and are automatically executing trades immediately, read up on the whle efficient market theory. Speculating like this with 1k is probably not a good idea, if you really want to roll the dice do some research and stick it all in some young promising company...just be prepared for the possibility that you will lose everything. Even with $7 commissions on either end you are losing 1.4% per transaction, you are much better off just sticking the money in a fund and letting it appreciate.

[leto333]

$1k is not enough to speculate with. If you place $1k into a high yield savings account and add $83 a month to the account, you will achieve over 100% gains in your account with no risk of drawdown. This is the best plan to accrue capital at your equity level.

Speculative capital should not be more than 10% of your net worth, generally speaking. And you should not risk more than 1-3% of your risk capital on any one trade.

Therefore, if you have a net worth of 100k, and use 10k as speculative capital, you can risk (the amount you budget to lose, not the amount you use on the trade)about$100 to $300. If you lose 50% of the $10k, you should stop speculating until you determine your problem and fix it.


The above was gleaned from the trading tribe faq http://www.seykota.com/tribe/pages/2...5-31/index.htm

and proven thru personal experience.