mark
There are some very interesting points in your post, and I will come back to them. They are really where the thread needs to go.
chump
You enter a trade without a stop 'loss' ,but your approach will use a stop to exit based upon a change to your calculated fair value and dare I say that that stop to exit could also be a stop loss...so if your fair value calc never found profit in the trade and at some future time your 'fair value' calc no longer held then you would exit ...is this right ? and yes if that is so I can also understand why you have not lost money for two years because a change to 'fair value' is unlikely to be a tomorrow event.
This is in essence correct.
The issues are asset allocation , time and temperament or I think it is....when these are in line the 'normal' concept of stop loss does not apply in the way many short term traders define it hence the apparent diverse views we have got here...nontheless I think it misleading to say there is no stop loss..there is one ,but the basis is 'fair value' hence the timeframe is going to be long if it applies at all !
There are many other ways of protecting your
principal...........one is via the selling of premium , and this will recoup principal in an ongoing manner.
It also is additive to the ultimate profit if there subsequently turns out to be one.
pratbh
Most of the other members are silently watching you being constantly hassled, heckled and bullied, but that doesn't mean they are supporting it. Whatever you do, don't lose your calm and don't at the heat of the moment use angry words that can then be used against you.
Thanks for the support....................cool & calm
fetteredchinos
Ducs, if you mean Reefcap, it is actually back online..i presume you post as Ducatti999 on there?
That is correct. I was ducati998, but got zapped, reincarnated as a 999
dbp
Well, well................
Now there is an undeniably true statement. Going over it again was also pointless in '00 and '01, and a great many people -- who are no longer in the market -- lost a great deal of money.
It's all well and good to claim that one hasn't lost any money during the last two years. When did the market turn? March/April two years ago. As they say, never confuse brains with a bull market (or bear market rally, if you prefer).
It's not something I want to get into again. Not my money. Don't care. As the French say, every pot must sit on its own bottom.
I suggest that telling a new trader that all he has to do is determine "fair value", then "sit back and wait", while not necessarily being "criminal", does leave that new trader vulnerable to considerable loss. Just ask those who trusted The Motley Fools.
Making assumptions again. The key point is to buy when the business is healthy, but the stock is grossly undervalued by the market. That is simply one methodology.
Buying bankrupts is an incredibly safe way to buy assets cheap..........+ you have the additional safety of the Judge and trustees telling you exactly what will happen.
Arbitrage is
riskfree.............100% guaranteed why would you have a stoploss?
charliechan
but we must still remember that the market can do anything at anytime. this is a key cornerstone about the reality of markets.
And herein lies the
fundamental difference. As a Fundamental trader, the market holds no fear for me, it's daily quotations are merely an invitation to buy or sell at my convenience.
It does not dictate what I should or shouldn't do.
I take my calculation of a securities value from the facts..........not from an emotional, hyper-active such as the market is.
Hence, technical traders, who are however not trading on a valuation, but on momentum, must see things differently.
Have you never wondered why some support level held, while another support level, identical in all respects failed?
The reason is that one support level represented value, and was supported by value hounds, the other was merely a technical support, and hence meaningless.
am no accountant, but even i know there are several ways (accounting models) a company or government can use to publish their reports. ie they can chose how they decide to display their information in order to attract investment funds.
And there are many ways of discovering the ruses that are used.That lies within the skill of the analyst. A bad analyst will get caught, a good one will not. With an example like Enron, there were many analysts calling it a dog all the way in it's run up. Principally the people that got hurt the most were Enron employees.
The fundamentals signalled Enron as a dog far in advance because there were just so many anomalies within the cashflows, that it never looked like a real business. This to any analyst worth his salt, is enough to stay well away.
ta is the vision - you see what price is up to.
Price in a vacuum however tells you nothing.
To trade momentum, however, I agree it is not necessary to know anything of the value, you are seeking to profit from short-term fluctuations.
fa is the hearing - you hear the roumors they want you to hear.
And here is your bias coming out.
FA is not about rumours. It is about collecting the facts, and through an analysis, seeing if the business is healthy and profitable............if it is at what price can you buy it?
If I offered you a brand new Porshe for $1000...........would you buy it?
You would think........con.
You'd inspect it.
If after all your checks, not stolen, etc...........would you buy it?
That is value investing.
barjon
How do you define "fair value"?
There are a number of ways.
One very quick example is in Chap11 the Judge will tell you.
You have all got hung up on a single way of making money.............that is buy a stock long and hang on.............this is a long way from reality.
ok - since we've agreed that exit strategies (won't use the emotive sl word ) do share the same characteristics albeit from a different basecamp, I wonder if we could go one step further and that is that I wonder if the gulf between the two camps is primarily set by timescale?
While time can be a component, and is very important, it is not the foundation of managing the risk.
cheers d998