Thanks, Lock ... very much. I've been a believer in stop-loss discipline for many years. Some, I'm aware, are not. But knowing a mate who twenty years ago lost nearly three quarters of a million dollars by not exercising it helps me to maintain the faith (although it's not a matter of 'faith'; the stop-loss is a rational rule - pure & simple). We had both bought the same stock at around 40c. It rose 1c and then weakened. It hit my stop and I lost around $350. My friend (a lawyer - intelligent, not the least bit silly, a good bloke) sold, I think, at 1c.
And why didn't he obey the stop-loss rule? Because, as it has happened to - I'm sure - just about all of us at one time or another, he got smacked over the ears by the Double N-IAGSIGBU syndrome ('No-no-it's-a-good-stock-it'll-come-back-up'). Of course, various other syndromes kick in as the price continues to retreat, e.g. D-SSWIBS ("Damn-shoulda-sold-when-it-broke-support), CSNILTM ("Can't-sell-now-I'll-lose-too-much) and FXXK (FXXK!!!!!!).
I admire the knowledge (and sometimes the guts) of the non-believers. They may generally understand, though, more about the true value of a stock than I can. That kind of fundamental analysis is a 'black art' to me. I'm a 'visual' sort of bloke so I understand the market better by looking at the behaviour of investors as reflected in the charts.
As Buffett has said, "Stick to what you know." So I do!
Readings, too, particularly from my two books by Jack Schwager ('
Stock Market Wizards' and
'The New Stock Market Wizards'), confirm the good sense of adhering to the discipline. Selling when the SP turns against you means that you keep the bulk of your capital to re-invest when the next 'buy' signal comes along. There's no more stimulating trader to read about than Mike Minervini whose, starting in 1994 (until the book was written), managed over five and a half years to achieve an average annual compounded return of 220 per cent.
Impressive?
Minervini runs very tight stops and doesn't mind being stopped out a number of times before the stock he's interested in behaves as he believes it should.
I would have happily stopped out of SRI the other day had I been on screen (I run my own stops; don't do conditional trading). But, finding myself down here below my buy price, the fundamentals kick in and I am cheerfully reassured.
As I wrote somewhere above, '... there's a quid to be made in SRI.'
Thanks again for the compliment, Lock. I enjoy reading your posts ... and Nijiman's, too.
Good luck to all of us.
Stops in place, always
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Not a pro; simply a trader who loves the game.
