Duel Aspects To The Portfolio

My Philosophy basically is about two key aspects.
1)Managing the allocation portion of the portfolio and
2)Managing the individual trades.

The allocation portion is all about the correlations and balance between expectations of capital flows. For example, you have a trade in Commodity, Bond, Stock Index, and Currency. You may shift it so you have a slightly larger position size, or even an extra position in one particular area, but you always want to gear the allocation to "weight" it towards the area that either gets you the proper net correlation (ideally zero or slightly negative), or "weight" it towards expectation of return, if you have any particular edge in any one asset class.

The individual trades are structured in a way to work along with the correlations.

The leveraged version of that might look like this

But the individual trades must only be sold when the conditions of the trade itself dictate that you lighten up, not because your portfolio dictates it. Otherwise when the market is doing well and a position is working, all across the board, you will have to sell what is working, which is usually counterproductive. For that conundrum you can remedy the situation if you lighten up the stock index or add a hedge and reduce the cash allocation, or if you prefer, "convert the portion of cash allocated towards hedging from cash to an actual hedge".

Managing the individual trade can be about technical analysis, or it can be about risk/reward or both. For example, you might cut a trade, even when it's overall up from your buypoint if it makes a lower high and/or a lower low. If support is breached, or if it has surpassed the target and is overbought or shows signs of slowing. You probably want to keep it simple and only use targets and stop losses initially, but eventually you have to learn to when possible, let your winners run a bit longer, and when possible cut your losses before the maximum stop price is hit.  This can improve upon a risk/reward that should already be structured to win. In other words, if you put your target as 3 times the amount you risk if it stops out, you have to be right a minimum of 1/4 times as you can lose 3 times and win it all back on the 4th. Except when you factor in money management, your position size will never be small enough that exactly 1/4 is profitable. You must expect to do much better, particularly since you will need to beat the market for it to be worth your time.

For example, if you buy at $4, and your target is $5, and your stop is $3.50, you are risking $0.50 to get $1.00, so you must be right 1/3 times as you can lose $.50 twice ($1), and gain it back on the 3rd time assuming position size is the same. Of course, if position size does not adjust downward as account loses, you have a possibility of losing it all, which is not acceptable. Either way your Reward should outweigh your risk, and your win percentage must be profitable. If you don't know what your win rate will be, aim for 3 times the risk, otherwise don't place the trade.

So as you run your portfolio, you might have 4% in leveraged option trades, or 20% in individual stock trades instead. Within that you have individual positions that you must manage. Overall you also must be sure to balance the amount of overall risk according to confidence in each particular asset class. In the case of "short term trades" or "long term trades" those can be allocated according to your ability to outperform in each particular area... with some kind of minimum baseline to build experience and have growth potential in numerous market conditions.