Stop Loss Policy

[traderx]

I had reservations about coughing my loss on ATN for fear of showing weakness. I now know I did the right thing by sharing my pain with others. MORE importantly, I now know I was not alone. Where is this taking us? WE BADLY NEED TO REVIEW OUR STOP LOSS POLICY. This is now a confirmed tech bear market and holding on to a share in the belief it will rebound is dangerous to future survival in this game. Overall trading success will be determined by controlling and minimising losses rather than purely an ability to pick winners. Why? Because in this market TA does not always work. We all know that now.

So; what I want, is for all our members to discuss Stop Loss Policy so we NEVER, NEVER, NEVER again get into this situation. It is living in a dream world, believing the share will bounce!

Tracy Fantico who is a successful CI lady member, I believe a full time trader if I am not mistaken, adopts a 20% fixed stop loss policy at all times. I like this because it is flexible enough to allow for a bounce, so you don't get stopped out too often but tight enough so you do not lose your shirt. Losses can be huge in short time scales on relatively small quantities of shares, eg 1000 ATN in my case. Can I invite everybody to debate this subject. Could be the best investment of time we ever make. Lets be determined NEVER to go there again because the only winner is the enemy, the MM who is having a ball right now at the expense of the private investor/ trader.

No financial advice intended

Tx

 

[Riz]

Useful Post, Tx..
As you`ve already put the reasons why a stop loss policy is required, and I do agree with your views in this regard and I am sure most members also do, I don`t feel it`s neccessary to give my reasons separately..only that in these market conditions it is more than required..it's a must..
So why do we often neglect it?
greed and pride...drive us to wishful thinking..so now I believe no decent overall profit can be acieved without the ability to control and minimise losses as well as greed and pride...stop loss advice can never be overrepeated...

[This message has been edited by rizgar (edited 25-11-2000).]

 

[titus-uk]

This is the best advert for a stop-loss policy.

I have only started in the markets this year (baptism of fire!). From my first trade I had a stop-loss of 10%. I had kept with it every time until this time. Before I made losses, but my greatest loss was when I discarded my policy on Baltimore this time around.

In one sense I am lucky. If the US get their act together, there may be a short bull run where I can recoup my losses and break even (BLM is very good in that situation!). However, if I had sold out at 480, then instead of breaking even, I could have actually made a profit. Sometimes knowing when to walk away is what makes you rich, not the inspired choice of equity in the first place.

To have a cold unemotional stop-loss is essential. Because the emotions of greed and fear are so strong, they can and do cloud our judgement(I'll just give it another chance...it may rise....). A stoploss takes the emotional side away. There may well be the odd time that you will "miss" a bounce. However, they are few and far between, and a stop-loss policy will save you far more in the longterm than emotions ever will.

From someone who has learnt his lesson!!!!
Mark


------------------

 

[Uncle]

Three Cheers....at last the message is getting through about the vital application of a STOP LOSS. For those regulars of this BB and its predecessor CI will know it has been my pet theme throughout.

It matters not what percentage or method one uses but whatever it is, it must be applied, regardless of gut feelings or any other emotion or sentiment. It may be you come out of a stock only to see it rise again. Well at least you will have money to buy again either that one when the opportunity occurs, or such other as may show an opportunity also.

Remember getting OUT is the KEY to PROFITS. My own method is to get out at sooner rather than later, especially if profits are already built in. Remember small profits compounded are the way to riches, not hoping for that share that goes through the roof.

Best wishes and success to all

John

 

[traderx]

Excellent contributions guys, Uncle you have obviously used a stop loss policy rigidly with success. What percentage would you recommend. Tracy's is 20% but that could involve a substantial loss? I am interested in members views on this point.

Tx

 

[shelman]

Another good reason for stop loss is that you can offset against gains on your tax return saving you 40% if you are in that bracket.
Just imagine you have a large tax bill looming and you are sittin on a loser you haven't stopped. If the stock is a favourite and you think it will recover you could have B&Bfasted it before they changed the rules,now you have a dilemma, sell it, take the loss and hope it does'nt recover before the 30 days are up or go into a new tax year carrying a loss and having tax to pay.
It's a lot less painful to follow a strict policy of stopping and believe me you suddenly become more confident and feel more professional in your trading.
Good luck gang
lets get rich painlessly
Steve

 

[Uncle]

TX..... I dont apply a fixed % but as general guide it is between 5% and 15% if I am looking at a % - depending on what time scale I am looking at - and my normal trades are 1 to 45 days, but there are other ways such as the last low price which many people favour or you can use a break down from the upper Bollinger Band or a Moving Average crossover or another indicator crossover such as a Stochastic, but in the end it is one for you to experiment with, subject to your trading style. In any event 15% would be my absolute maximum before its executed.

Trust this is of some assistance

John

[This message has been edited by Uncle (edited 26-11-2000).]

 

[traderx]

Sorry I didn't get back to you John, but thanks for giving me the benefit of your experience. I have used stop loss but seem to lul myself into believing the share was so cheap it must recover soon. Like David Cobbe would have said, when is cheap, cheap and why is it so? I re-read some chapters of John Pipers, Way to Trade today, I would recommend it to anybody as a way to revitalise and reshape your attitude to trading successfully. A common theme of this book is Stop Loss without emotion.

Tx

 

[Uncle]

Nice one TX........... John Pipers book is one i have recommended on CI and have found the information contained therein most informative and instructive. Pity the guy isnt quite so fluent in his lectures. But then as i have also said seminars courses lectures all try to say so much in so short a time you go away with your head full and then remember only the bits that influenced the memory to put to use in a practical way. When you consider the cost against the knowledge derived you can buy a library of books from which you can continually derive more and more knowledge.

So folks as TX says that is one good book to buy to understand the benefits of STOP LOSS, and at the same time will also teach the benefits of compounding profits.

Best wishes to all in the hunt this coming week.

John

[This message has been edited by Uncle (edited 27-11-2000).]

 

[Aaln1]

Shelman mentioned becoming more confident as a result of stoploss rigorously applied and I think that is the key. Discipline applied thru thick and thin leads to confidence. Whereas watching the arse removed from your pants is confidence sapping; leads to apathy, fear and irrational reactions. All of which I have experienced in recent weeks. An example I mentioned in another thread was selling a performing share to support the losses. Where was the sense in that? I should have dumped the losers for a short term punt on the performer - but didn't. Beware, be nimble! Hope this helps.

------------------

 

[Aaln1]

P.S.
That's why I adopted my signature - its how I intend to go on. Float like a butterfly.....

Thanks Muhammed - NOW I understand!

------------------

 

[Riz]

got this from iii BB..good description..

"Just look at any lower price as further opportunities, thats the major difference between amatuers and professionals, one acts while the other acts like a rabbit starring into oncoming headlights and just frezes!"