(Note: This article describes in detail the philosophy we use for diversification.  It is quite a long read.  For a brief description of how to use this service, see How to use the Trader's Signals with a Non Retirement Account, and/or How to use plusonetrader.com with a retirement account.)

 Can "Prudence" and "Short Term Trading" be used in the same sentence?  At Plus One Capital, Inc., we believe they can.  While there are many who attempt to predict where the markets will be 12 months ahead, we do not make any predictions for the future.  We do believe, however, that the markets will move.  Our strategies are based on that belief and our goal is to take advantage of that movement in what we consider to be a prudent fashion. 

In order to accomplish this, we use both Long trades, and Short trades.  Long trades refers to the purchase of stock while Short trades refers to borrowing shares and selling them on the open market.  If using a retirement account such as an IRA, you cannot Short stock.  Instead of shorting stock, our Trader's Signals can still be used to go long with Exchange Traded Funds (ETFs) which have a short bias.

In order to attempt to limit loss, specific account management techniques are employed within the Momentum Trading, L.P. Investment Fund.  Subscribers to plusonetrader.com are encouraged to either follow these techniques, or use some type of similar diversification with which they are comfortable. 

Step 1: Determine a specific number of securities to trade in a portfolio.  See "Stocks Followed" for a list of stocks that plusonetrader.com will issue Trader's Signals on.  One security per $10K in account value is a suggested rule of thumb up to account values of $100K.  In addition, in accounts with a value of less than $50K, we suggest using the Exchange Traded Funds (ETFs) we follow instead of individual stocks (See "Exchange Traded Funds (ETFs) Followed").  Ten securities could be a reasonable amount to trade with in accounts from $100K to $1 Million.  Above $1 Million and up to $5 Million, trading between fifteen and twenty could be sufficient. 

Step 2: Allocate an equal amount of capital to be traded for each security.  For example, if the account is worth $100K and you will trade 10 different securities, $10K would be allocated for each security.  Note: this number is not set in stone and allocations to any particular security will ebb and flow as Trader's Signals occur. 

Step 3: Trade 40% of each allocation per transaction, or if using a retirement account, trade 20%.  If the account is worth $100K and 10 securities will be traded, each transaction will be roughly $4K ($2K in a retirement account). 

Step 4: Log into plusonetrader.com near the close of each market session.  Trader's Signals will be posted within 15 minutes of the market close (between 3:45 PM and 4:00 PM Eastern Time).  Choose any amount of Trader's Signals posted and enter trades.  Within 30 minutes of the market close, profit targets and stop loss limits will be posted for all Trader's Signals from that day.  Enter a Bracket Order with your brokerage firm to sell at the profit target or the stop loss as listed in Trader's Signals.  If your broker does not accept bracket orders, you can either enter a Good 'til Canceled Order (GTC) to sell at the profit and monitor the position if the profit target is not met or you can find a broker which does accept bracket orders.  Although this is not an endorsement, TDAmeritrade, Tradestation, and Scottrade (in December of '08) are a few brokers which do accept bracket orders. 

If using bracket orders, you can simply monitor when your targets have been reached.  Historically, we have reached our profit targets over 90% of the time before our stop loss limits have been reached and often times, these proft targets are reached within just a few days.  See "Historical Performance" for an idea of how long positions are held.