Join our investing community

Trading Monte Carlo...

Discussion in 'Shares' started by Tropo, 8th May, 2011.

  1. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW
    Another point of view from ....
     

    Attached Files:

  2. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Tropo, thank you for the article, which confirmed somehow my own calculation of the probability distribution I did in 2004 based on the historical data between 1980 - 2000 for a sense about the viability to protect a dirty-cheap fish portfolio with different stop-loss schemes.

    Actually it is one of reasons I started to update my mind with the top-down approaches. Since I did feel technical analysis if not used with fundamental, logic, reasoning, insight support, would result in blind comfortable feeling in our market playing.

    Stop-loss's risk is that some big losses which you could prevent to happen but you could not stop since we are human and we always make some idiotic mistakes without carefully plan in the market.

    Stop-loss could let its believers to make the losses very easy and try to stop the loss. When a market player's job become make losses and stop-losses the risks to fall down completely would be quite probable.

    Don't stop the losses but stop repeating the mistakes which makes the losses. How? Find the causes of the losses by reasoning our analysis and judgement, and finding why we choose the option of decisions to get the losses!

    The more important thing we should not forget, is sometimes we are just make a decision right but future perform differently without the reasons we could understand!
     
    Last edited by a moderator: 9th May, 2011
  3. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW
    There is no perfect way.
    No matter what some people think, exit strategy is paramount.
    There are few different approaches, but trading/investing without exit/stop is a loser's strategy.
    In the beginning loss is small. With time loss is getting bigger, so losses should be cut as soon as possible.
    Again...to me fundamentals = funnymentals... :rolleyes:
     
  4. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Some losses are necessary for winning in the war at last. Good or bad losses depend on what're for and what're the limitation of the affordability. Who could buy and the price just go up? Stop-loss is wrong not about whether or not the losses could be stopped but whether the losses are caused by the last vibration or quivering before the train start to leave the station or completely detail to the hell.

    It is the poison to the capital of the most of market players for anyone to make losses without reason and stop loss. Most selling actions should be to collect the money on the table for profit not just make the losses and get less money from the table, which is known by each gambler in the Casino. Most of market players make the irrational action looking right in a system way which make them comfortably lose more and more without the regret to think themselves as gamblers.

    I am scared by the comfortably losing money in the system way!
     
    Last edited by a moderator: 9th May, 2011
  5. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Some market players, especially those who try to get the profit from the relative market performance, place stop-loss orders to sell securities at specific prices, usually marginally below their cost even some measures for short-term concerns are carefully taken.

    1. If the prices rise, the orders are not executed

    2. If the prices decline a bit, presumably on the way to a steeper fall, the stop-loss orders are executed.

    Although this kind of strategies may seem an effective way to limit downside risk, it is, in fact, crazy. If you just buy the price up, how could you buy absolute low for absolute profit.

    A user of this technique acts as if the market knows the merits of a particular investment better than he does or really want to bet against to him.

    More thought in Special issues: how to stay in touch with the market? - Member Blogs
     
  6. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW
    Having an exit point is one of the most important considerations in business of trading/investing.
    It's designed to get you out of trouble as fast as possible.
    One day when you lose most of your money you'll learn what stop loss is designed for.
    The only protection against big loss is stop loss placed at the right level/price.
    Some people believe that they can control market, unfortunately the only "thing" you can control in the market is the amount of money you can afford/willing to lose.
    More than 10 years ago a lot of people bought TLS shares paying $8/share.
    Today they are still down, and there is not much chances they can get their money back (ignoring inflation etc...).
    Buying low, guarantee nothing.
    Good example is HIH, - company which does not exist anymore, so no matter how low one bought HIH shares, still lost money.
    When you lose your capital, the game is over.
     
  7. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Haha if we want to buy low but we find we keep to buy too high, it is the problem we could not make right judgement, get the corresponding data collection, do the necessary analysis and reasoning, and then make the wrong decision. So actually you do not buy the low but buy the high. If you buy high and lose your shirt, it is question you have to answer that is why do you buy high?; Could you buy absolute low?

    If you bought HIH and TLS at the price much higher than its price now, you fail to buy low. That mean you don't know how to buy low and sell high! If you could buy extremely low for 80% of your shares, why do you stop the losses in rush? There are black swans in the market and it could change something in days. Why don't buy the shares that you don't need to run away in rush or never let you get big losses for your portfolio?

    I learn to buy no losses for my portfolio for long time. If I buy a absolute low I don't need the stop-loss in rush! Since no risk to lose for my portfolio as a whole, I could hold all to see if there are black swans to change their course better. No losses, no stop-loss, and then you would be very comfortable to learn how to play the market game!
     
  8. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW
    Yes...there are not only black swans but also black elephants, black holes, Santa Claus and the like.
    It seems to me that you are still very much confused...:rolleyes:
     
  9. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Haha Tropo, all of us have something confused.

    Value investors are asked "no loss" and doctors are asked "no harm." Do value investors never lose? Could doctors cure all of the patients without failure? We should be very confused, eh?

    No losses or no harm? how are they possible? Something is very confused! However if we could figure out the true meaning of them and the necessary or sufficient conditions to get them we would be benefited.
     
    Last edited by a moderator: 9th May, 2011