Brand new traders are best served by sticking to one trade at a time, but as a trader gains experience, there are certainly some advantages to trading multiple positions.
One of the biggest benefits of swing trading [1] multiple positions is that it diminishes the importance of any one trade. No longer will that one trade define your success (or lack thereof) in the short term. This is a big psychological edge which can set you free mentally as you aren’t required to watch and react to every single tick on your pet stock [2]. You can set your conditional orders [3] and let the trade develop on its own without micromanaging it, and in the meantime you’re able to scan for new stocks you may soon want to trade.
If you’re a beginning trader, you’re probably better off taking one trade at a time so that you don’t get overwhelmed. Trading the market takes some getting used to, and that learning curve [4] shouldn’t be rushed. Take your time and go at a pace which you’re comfortable with as you learn to improve your execution methods and develop a routine for monitoring the market.
Once you’re past the beginning stages as a trader and comfortable with your executions, I would encourage you to learn to trade multiple stocks even if you have a relatively small account. While focusing your funds in one stock will mean an opportunity to accelerate account growth, spreading your capital too thin can doom you to underperformance. Find a middle ground which will give you the best of both worlds [5]. And when the time comes that you can’t find trades which fit your risk/reward profile, simply step aside and remember that cash is a position [6]!
We trade multiple positions on a regular basis over at TheStockBandit.com. If you’d like to learn more about how we manage them, come check out the free trial [7] and watch us for 2 weeks. We’re confident you’ll like what you see.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com [1]
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