Help with citigroup

[akis]

Hi again, i would like to buy 10,000 shares of citigroup us is it a good move please advice ty all

[bryanmcn]

Unless your playing with a million dollar portfolio or larger, that is too big a position in my opinion.

Here's how I would play C

1) Determine what one percent of your portfolio is. Lets call it A.
2) Determine your stop - I would place a stop at $3.35 for Citigroup (Last traded at $3.97) - Thats the last support level.
3) Determine the difference between the last traded price ($3.97) and the stop ($3.35) = $.62
4) Divide this amount into A. That equals the number of shares you should buy. PLace your trailing stop as SOON as you buy.

For example if you have a $50k portfolio, 1 % = $500 so $500 / $.62 = 802 shares.

A tighter stop would allow for a bigger position but your more likely to get stopped out.

Bryan

[garilou]

Hi Sara, Bryan and akis,

Sara, you are right this is the forum for Canadian stocks, but on this forum there is not other place!

I think that the fundamentals for C were not too hard to get.
I never buy without looking at the fundamentals, but for the timing, it's hard to go without TA today, be it only because everybody does it!
So it takes a while for bad fundamentals to stop an upward momentum and vice-versa!
I do not see that a different religions.

Bryan, I found your way of calculating the amount of shares to buy beautiful!

Where did you learn that method?

If akis played your advice, he must have done good!
I think you just forgot to tell him to change his stop regularly.

And that, considering the last trading days, he might think about cashing in his gain soon before being stopped out!

A question: How did you come with the 1%?
Was it because it was a risky play?
Do you have a rule to decide the percentage of your portfolio you'll invest in a new stock?
I have already adopted some of the ideas you gave in other posts, for which I thank you, but this one, I would like to understand it better.

I am sure I'll still have lots of other questions after, but this seems really interesting: an old ape is never too old to learn new tricks.


And there is that never solved question for me is how to place a stop: for the same trade, on 3 different sites, I find 3 different  recommendations for the stop to place!
But as you said I try not to place too tight stops! If I think I need a really thight stop, I simply sell (or cover if it's a short!

Louise

[bryanmcn]

Louise

Position sizing is what the technique is called. Van Tharp documents it as did some of the "Turtle Traders". Read a few of the Market Wizards books and you'll see similar strategies.

1% is actally quite large. Some recommend no more than 1/2 %. Depends on your own risk tolerance. Play the game with this in mind and you'll see how well it works. By the way ... you must make fast decisions in the game or you'll take forever to get through it. Setting position sizes and risk levels becomes intuitive after a while.   
 
Your right about re-setting your stop. I like trailing stops. Etrade and BMO let you place a trailing stop but TD Waterhouse won't. The other option is to set them according to the most recent "low" but that requires more monitoring and attention.

Bryan

[Super Stock Picker]

Also, another way to calculate the position size risk is to use the volatility of the stocks rather than just a price difference between your buy price and your stop.

You can measure the short term volatility using the ATR (Average True Range) and size your positions relatively to it. So, let say that a stock has an ATR of 2, you will take a position twice smaller than a stock that would have an ATR of 1, and so on...

This way all your positions would hold the same level of risk, when looked in dollars per day.

[garilou]

Hi SSP and Bryan,

Thank you for those 2 different sizing strategies, that was always my weakness.
Maybe because I started with a so small portfolio that it was almost impossible to think about the sizing of it.

My main way to sizing was to buy only 1/2 to 2/3 of the position that I wanted,  see how the stock did, then increase my position. But nowadays, the markets change so abruptly that this strategy is often very deceiving. People (including me) take there profits very fast!
I will try to experiment both ways, and readjust my positions, first on paper for sure, and then try for real.
And I'll follow your advice (and my own advice to someone else): read more about this specific aspect!

Bryan, I do not know how the other brokers do for the trailing stops. What I do, I put a stop valid for let's say a month, then I quickly increase it every day or 2, according to the behaviour of the stock.
As for the level of the stop, there are so many techniques offered.
(on this point I did a lot of research and came out of it only more confused).
An easy one is to use the TDD level.
In your post, you talked about setting it to the last support, but:
1. as we once discussed, a support is not always available: because a support by definition must have been "tested". I own a stock where the last support is approximately 60% lower then the price!
2. If I had a clear support, I guess I would not put the stop atthe support, but a little bit lower, because by definition a support is the point where the stock could jump up again.

Talking of stop, I do not use only lower stops: I often put "profit taking stops".
I calculate the % difference between the price at the last big volume before an uptrend, I try to guess where there will be profit taking, and I set my "upper stop" to a annualized percentage.
Let say I had luck and made 6 to 10% profit (sometimes only 2%) in 2 days... annualized it is a lot, and I go out instead of setting a higher stop that would anyway reduce a lot that profit.
Sometime I get out too soon, but with the low trading fees, I can always jump back in.


Too bad that this discussion takes place in this topic.
I guess we should transfer the whole in a new topic, like: "Positions sizing and stops", or something similar.
Because this has nothing to do with "Help with citigroup", and akis does not seem to participate anymore...

But I agree, Bryan, sometimes, being "out of topic" allows more spontaneity.

Louise

[akis]

sorry for postin in the wrong place. i just wanted to let you know that i did make money on citigroup i bought at 4.04 and sold at 4.37 usd 4000 shares.

[bryanmcn]

Why did you sell?

[garilou]

Akis!

Happy for you!
I do not know why YOU sold, but I did something similar last week with the Royal Bank.
With Citygroup, those 2 big jumps Thursday and Friday at the opening, but always ending lower.
OK, all the markets did the same...
But the decision of the Obama administration about the mortgages hurt the whole financial sector, mainly the banks.

You did right: why wait until a stop would have taken a good part of your profit away.
I guess, looking at the price history, that you bought them on March 16, and sold them on March 26, this gives you an annualized return of ~ 320%! Not bad.
Better take quick profits these days.

And today!
Ouf, you must be happy that you sold, today's news was the cherry on top of an already bad tasting sunday!

After today's drop, you can always jump back in if you see that today was just a bad day...
RY is already starting to regain. Banks always find a way out  .

I do not know for C, but both RY and TD raised their mortgages rates.

Wait a few days though.

Good quick move!
Bravo! (SSP: this is not French but Italian)

Louise

PS: And since there is no special board for American stocks, I do not think that you posted in the wrong place...

[akis]

i am sure i can buy back citigroup  at a lower price if i get it at 3.87 i will keep it. you know i am a day trader and i do not buy on margine any more i learned my leason. Ty for your reply