DW8 Growth, page-6238

Interesting and timely question as earlier today a few LT holders and I discussed offline the increasing probability of some holders selling as the stock is edging into oversold territory (judging by the RSI). We usually expect that as some investors start to capitulate when ST downside movements exceed their personal comfort level, although in your case you made a process-driven decision to exit the position once your PnL met/exceeded -20%. And sticking to your process is generally a good thing. From a general trading perspective, I'd say a 20% stop-loss limit is quite liberal but without knowing the details of your approach, research process, ER per trade, number of trades run at any point in time, risk capital, hit rates, etc., etc., it is hard to generalize and determine if it's actually too little or too much room that you are giving yourself. Most of the traders I know (albeit they are all on the insto side) set their risk budgets tighter, often maxing out at -15% the absolute limit, and whether they phase towards that limit depends on the specifics of their approach. Typically the more technicals-based the approach the tighter the risk management framework vs. blended technical/fundamental approaches that often have wider limits around the level you mentioned. That's because the depth of research and conviction on trade ideas, as well as size, trading infrequency, and duration typically exceed that of technical trades. The actual level should match also your ability to manage the psychological pressure that may come from your investment approach, risk capital at play, and other factors.

If my math is right and the stop loss hit today around -20%, then presumably the cost basis was around 17c (+/- a little). Just using that as a ballpark figure and looking at it graphically, it seems you entered quite late into a trend that started mid-Feb. I am sure others can offer specific feedback on actionable technical signals over the past 3 months and more specifically the highlighted period that would be helpful, I would simply suggest revisiting the initial setup that led to this trade as part of a post mortem of your trade. IMO purely technical trading without consideration of fundamental factors is more challenging to execute repeatedly on a consistent basis, and a consideration of fundamental factors at the implied entry point (based on the assumptions I've made) should have highlighted at least 2-3 factors (e.g. valuation across different metrics, recent price momentum and % gain, just to name some high-level ones) to reassess the trade thesis at that time unless FOMO played a substantial role that overrode other applicable factors that should have impacted the trading decision/timing IMO.



I am not having a go at you or your process, I simply suggest this trade warrants revisiting and dissecting it going through your process' steps to determine what went right/wrong before taking a look at your risk management, stop-loss approach, and its limits. Focusing simply on the latter by assessing whether it is too high/low vs what others are doing is (imho) wasting your time, as even if you set the limit a lot tighter (or looser) it may still result in repeated loss-making trades if the rest of your process is not suited to what you are trying to achieve and how. I'd try to ensure you know the specific edge you are aiming to exploit and why (and is it repeatable?!), ensure your process is appropriately designed and adequately suited for the objective, that the process is consistent and implemented consistently, and that the risk management and review processes are executed consistently as well.

Your process should be uniquely suited towards your strengths and weaknesses to augment and mitigate them as appropriate within the framework of your investment approach. By all means, consider what others here offer as stop-loss limits as references but beware without full insight into the processes of other posters and the ability to compare them side by side vs. your approach the insight embedded in stop-loss specific information offered is limited at best. When I started building a position in this stock I had to be mentally prepared to experience up to 40-60% drawdowns vs. the initial purchase price due to the tick size at the time accounting for 20% min moves each way. (Your approach could have seen you stopped out after 1 day of trading back then.) While that may seem massive and an outsized risk to some, there was a substantial margin of safety built into this investment and the purchase price in terms of the overall valuation of the business vs. cash assets vs. progress and timing of strategy execution, etc, etc. In that sense, it was a lot closer to an asymmetric opportunity than many other things I've come across in the last 20+ years. This I believe meant I assumed probably a lot less risk (due to timing) than others, including top20 holders, on this forum who entered well ahead of me. And timing is important in investing. While my max drawdown assumption may seem excessive to some, it perfectly matches the approach for this stock at that time vs. the outcome objectives I had and still maintain.

I generally don't believe comparing different approaches to another is all that useful as even the same % limits may result in substantially different scenarios. For example, if two investors have the same 20% stop loss limit when investor A holds $1,000 while investor B holds $10,000,000, we may assume the emotional impact of loss on investor B is higher, though it is not that easy as the position size doesn't provide any insight into the impact of loss on an absolute wealth level for each investor. There are a number of investors on this forum, including Top20s, who hold large $ stakes (now accounting for a substantial % of their net worth) for whom experiencing a pullback from 21c (-35% vs ATH) in some cases means millions of dollars less in portfolio value, yet who continue to hold and would not sell if the shares hit 10c this month. Or even in case the shares dropped to 6c if the global capital markets crashed and the rest of the ASX got crushed. They'd reassess their thesis and if anything has changed that warrants taking action and if it has not they'd hold in line with their initial thesis. Most of them would actually load up more if nothing had changed on a fundamental level, they had access to cash, and the position size was allowing them to add more (vis a vis their risk management process). My initial thesis in 2020 was a minimum 4-5 year time horizon for the business to gain traction before I assumed the firm's fundamentals and valuations would give investors a much more specific insight into what the firm would be able to grow to over the next 5-10 years. I am 14 months in and am nowhere ready to part with my stake, but then again my approach, focus, and process are different from yours based on what you stated. Hopefully, this offered something to think about and maybe an inspiration to take another look at this company from a different angle. Valuation is relative, in the eye of the beholder and Mr. Market keeps on changing it daily. Timing is relative too as vs. other investors you will be too late buying into the stock, but also way too early vs. others (if my thesis is correct). Good luck!