Many friends feel frustrated when they see loss in their account. Therefore I wanna post an article about when to cut lost so that we all may know the right thing to do at the bad time.
Normally entering a position, a clear plan should be in your mind. For example, this time even i bet into HMIN's er, a stop was set at $32.6 when I loaded around $33.1 last week. The strategy to set your loss stop may include 2% stop one or others. But in my opinion, setting the stop is a methodology which is quite related to every stock. My experience is setting stop right below its past 20 days low work the best.
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Selling Stocks To Cut Losses
Success in the stock market is as much about limiting losses as it is about riding winning stocks. A rule-based selling strategy can help you avoid heavy losses and preserve your portfolio. This lesson explains how to sell when a stock selection doesn't pan out.
Know When To Fold 'Em
Nobody's right all the time in the market, not even veteran market professionals. But as the famous investor Bernard Baruch once said, "Even being right three or four times out of 10 should yield a person a fortune if they have the sense to cut losses quickly."
Being a successful investor is just as much about limiting losses as it is about riding a winning stock. Downturns are a part of life in the market, and you must act decisively to shield yourself from excessive losses. If your stock selection doesn't work out and you're faced with a loss, don't let your pride stop you from admitting you've made a mistake and acting quickly. Cut your losses early and move on. You must make rational decisions, instead of trying to rationalize your way out of a costly mistake.
It's not just your own personal opinions that can be wrong. Analysts or market commentators can be just as erroneous, and basing your decisions on their opinions can often lead to disastrous results. Investors often buy loser stocks, justifying their decision with remarks like, "All these Wall Street analysts are saying great things about this company," or "This technology is the greatest thing since sliced bread. The market doesn't realize it yet, but it's bound to become a household item." Famous last words.
36 comments:
hehe, now my pocket book is William O'Neil's "the successful investor".
I absolutely love it. I wish I had read his books much earlier. I totally buy in his 3-to-1 profit-to-loss percentage plan.
Anyway, we should never ever have a "long term loss".
"Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise"
- Peter Lynch
I saw insider bot mgn, that's why I get into mgm. haven't finished buying in yet.
it is not a rebounce play. will reach new high.
Well said. :)
hi, bobobobo,
How can we discriminate which trade is done by insiders?
I haven't understand the details yet.
there are a few website you can trace insider trading.
I am using this one.
http://www.secform4.com/
I am going to buy MAR tomorrow. Any comments? :)
Thanks,so touched! This blog is really friendly, almost the first thing I will read everyday, hehe.
A few questions:
No 1. 2% for DT or short term or long term? It seems too tight for long term.
20 day low sounds reasonable. I will try try.
No 2: Where can we see insider actions ah?
No 3: How could we monitor so many stocks in the market? I have 20 on my streaming charts and I have trouble follow them. I don't have wsj yet and it looks like it will take a lot of effort in following even a few stocks. MGM is the #1 AH stock, how could u flag it out way before that?
Sorry if the questions sound naive, looks like it will take me quite sometime to develop my own skill set like bobobobo said.
MAR? I like marriot a lot, and happen to get involved in their time-share program this last trip to Florida. I am impressed by their management, but I have not studied the stock yet. It's on my homework list.
Carol, :)
hi bobby:)
yes, 3-2-1 policy is what I use too:)
for example, i got in $33, and set stop at $32.6, the lost will be $0.4. and the profit i expect would be around $35, which will be $2. the profit/risk = 5/1.
hi bobobobo dude,
that is a nice play. I recently also study the insider buy out trade strategy. I really think this is a good strategy. Will elaborate it later on.
hi chanel,
I don't know about the fundamental in MAR but from TA aspect, it may also rebounce according to my technical indicators.
RSI(15) Below 40
RSI(5) Below 40
Near Lower Bollinger(20)
Near Lower Bollinger(10)
Oversold Fast Stochastic(5)
Oversold Slow Stochastic(26)
Oversold Slow Stochastic(38)
hi carol,
A few questions:
No 1. 2% for DT or short term or long term? It seems too tight for long term.
this is for short term trading or long term trading. DT maybe smaller.
20 day low sounds reasonable. I will try try.
No 2: Where can we see insider actions ah?
bobobobo has given his reply to you. check the website he list.
En, saw the website, very good ah. PFPF, looks like Scottrade's insider info is not as good. Thanks to both of you!
The website is really professional. But I haven't master the trick to use it. Let me try. Thank bobo and qianhu.
I think another factor about insider trading is the timing effect. I feel stocks react to insider buying much quicker than reacting to insider selling, probably due to this rationale. But insider selling should make a red flag for us, because one of the any number of reasons could well be the one that eventually hurts the stock.
你们说，人为什么一定要做research写paper呢？譬如你写了一篇paper,然后投到infocom上面去，能对你的人生有什么意义呢？还不如去todai吃饭意义更重要，你说是不是？
对俺来说，做research和coding是一种兴趣，就好像以前的人玩琴棋书画一样。反正活着总得有点事干吧。
让我想起了某句台词
“你说人为什么要吃饭呢？吃完又要拉，拉完又要吃的……”
tomx inherits cantonese's good sense of humor.
你们说，人为什么一定要做FA research, TA分析呢？譬如你选了一个pick,然后投到mitbbs上面去，能对你的人生有什么意义呢？还不如去todai吃饭意义更重要，你说是不是？
晕阿，技术含量这么高的blog里便也看到纯净水啊，呵呵
I will go to get the book mentioned by bobby and check the website given bobobobo (are you the same guy or not?) Many thanks to you for detailed explanation and instruction. It is priceless for me.
skiii,
welcome here:)
hi Bobby,
what you mentioned about insider selling is reasonable. But insider selling may not be a red flag in several exception:
1. the float of the company is small.
2. the stock has double in a short time, says 2 months.
these may not be bad thing.
fanzhi,
are you also going to submit the paper to infocom?
I will submit one paper to infocom due by July too.
bobby said...
你们说，人为什么一定要做FA research, TA分析呢？譬如你选了一个pick,然后投到mitbbs上面去，能对你的人生有什么意义呢？还不如去todai吃饭意义更重要，你说是不是？
hehe, this is interesting :)
I don't like mit stock board anymore. too much bullshits.
I know qianhu, zzpt, goneaway there, that's good enough.
trader168 is getting better. although I never post anything yet.
daqian, one day daoluan is there, I will visit that place.
btw, I don't give much credit to dt. please read
http://mitbbs.com/bbsann2/life.faq/Stock/huhaichenfu/sucess/M.1025472441.A/mummy的股市人生
for more info.
so as http://www.trader168.com/bb/viewtopic.php?f=5&t=7214
peter pan, his old id was swingbh.
you will know how silly it is when ppl debate about kettybaby's system performance last time. 46% in 3 weeks? is it a really good # in this bull market?
mummy, swingbh, 捣乱者, I respect these guys. if you are new in the market, it's better for you to read their posts first than following other ppl's pick to make little money.
don't waste your time on mit stock board.
today, I am waiting to see if rimm will reach 159 as daily high, so as nmx. I will continue to hold itg, mgm, grow for a while. I am more interesting to know how accuracy of my price prediction system than making money at this point, cause money always is there.
take care.
"mummy, swingbh, 捣乱者, I respect these guys. if you are new in the market, it's better for you to read their posts first than following other ppl's pick to make little money."
I agree with Bobobobo although I admire dashadan down to earth. However the pick by Metronic, swingbh, etc. is more safe to play, which is exactly what newbie should follow.
hi bobobobo brother,
you have a right good pick in MGM, hehe, awesome, congratulation:)
Because SwingBH is also an investor type of guy as what I hope to be.
I seldom follow others pick unless I go through those picks myself.
Bobobobo, thanks so much. I can feel you are on a totally different level compare to myself. I also forbidden myself from DT. I will try to develop my own system over the years instead of finding whose picks to follow :-)
Knowing Qianhu, you, zzpt and TPP is a real blessing. Feel happy!
qianhu brother,
my mgm is a 70% lucky play. I like grow better.even my yesterday's grp play is better. because of the consistency.
if I can find more pick like mgm consistently, then I can reduce my trading, then I will be more safer, richer and happier.
It's all about lucky this time. otherwise, I will urge you and everybody in this blog to follow.
I don't know when can I find the next mgm, might take months or years, but I will reach that level eventually, because that's mummy's level.
I feel daoluan is a big boy, powerful and lovely, hehe.
skiii,
my price prediction system is base on his method.
try to learn as much as you can from his chart. I have never spoken with daoluan either in person or on daqian, however, from what he said, from his chart, I have already learned his methods.
do you learn part of my methods after looking at the stock list I gave u? :))
general speaking, once you know ppl's pick and its in/out point, if you have strong background knowledge, then you can understand the whole idea.
I learn a lot by diving in all of the message boards in this way.
right now, when I visit other places is to find out the shining idea.
if I can find more pick like mgm consistently, then I can reduce my trading, then I will be more safer, richer and happier.
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of course, you will find more and get richer:)
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