Stop Losses

With the XJO down about 340 for the week and more to come on Monday what a good time to start a discussion on the use of stop losses.

Firstly nothing I say here is a recommendation to do anything. I have built up my own investing philosophy over the years that suits me. The way I do things may be strongly criticised and objected to by other investors.

The whole point here is to learn so we can all become more profitable investors.

I don't use automatic stop losses. (sounds like AA) My approach to share market investing involves 100% hands on ie. selection, buy, sell.
The only variation to this is my investment in the Navra Fund for the great income it produces.

The market will dictate in which direction a share price will go. All I do is research stocks that I think will go up and then buy them if they look like good value.
If I'm wrong and the share price declines too much I'll sell. That is, when I feel I should sell because there is better value to be had elsewhere.
Yes, it's a bit seat of the pants stuff but I like to keep it as simple as possible.

Only I decide when I will sell, it may be before the normally used setting points for stop losses or it may be after.

I used to use a percentage point from the previous high for a stock and if I still had been using that I wouldn't have been stopped out of four of the stocks I currently have. I bailed out of a couple early in the week though.

Looking forward to hearing everyone elses point of view.

 

Stop loss is a matter of 'to be or not to be in this business'
Traders without stop loss become investors and investors without stop loss become LONG term hopers (eg. Telstra bought around 7&-$8).
As long as you have got stop loss of any kind - you may survive in the market.
The most important rule of investing /trading is :
Preserve your capital and protect your profit!

 

So you do have a stop loss... Its when you can no longer sleep at night after losing too much in the trade. The only way to not have a stop loss is to purchase the stock then never look at its price again...

I consider stop losses a part of the business... If you don't have one, however arbitrary, then you are just throwing the dice (ie gambling)

My $0.02

regards,

DaveJ

 

I agree that stop losses are a basic requirement. I have never understood the logic of "buy and hold through all market conditions". If a stock goes up say 10% average over 5 years, but during that time fluctuated, by having a simple stop loss in place you could avoid the worst of the negative years and still keep most of the highs of the positive years, making your potential return much higher than 10% avg.
Personally if I didnt have a stop loss in place, I couldnt sleep from the worry. I put a stop loss down about 4 seconds after I put my buy order through.
Having read Market Wizards recently, I am even more convinced that stop losses are imperative. Personally I like to know what it is before I enter the trade, however some of the guys interviewed in that book let their losses run a fair way if they are convinced they are right, and they apparently make bucket loads of money!

 

Hi can i ask a question regarding investing and Trading. Have you guys done a share market trading course like Home Share Trader or something similar to learn how to trade shares for investing etc.

I am still learning about it and was wondering how you guys tackle it.

Thanks

 

Excuse me while I pick myself up off the floor

I did do the free Safety in the Market seminar, was no earth shattering insights and the presenter didn't want to go head to head against me paper trading. Can't see the value in their software or their training.

One day Navra seminar was good value for money and Steve explained the Nav Trade system well.

I use a combo of B & H, dividend striping and trading.

I avoid systems that rely on planets aligning or require you to put a bra on your head as in Wierd Science while you use their software

 

"I avoid systems that rely on planets aligning or require you to put a bra on your head as in Wierd Science while you use their software

Bundy 1964.

Hahahahahaaaa....Good one !!!.
Yeh right = Safety in The Market ...
What about Safety in The Bedroom ?? It amazes me that those guys are still in the business...

I think that Triu is talking about Home Trader (HT) group from Perth.