Forum Archive Index - May 2000

[jesse <johne777@hotmail.com>]

'  …  I don't think ten per cent stop loss rules ..... work particularly
well for
  several reasons'.

Hi Nigel,
agree. Every investment is different, but imho, every investor should
have a plan. Personally, if I'm trading a stock, I know before I buy it
where my out is, whether its a gain or a loss. The most difficult thing
is executing it or sticking to it. It's so easy to reach your profit
goal and say, please, please, just one more point! Same thing when
cutting a loss.


'If you buy a value share then:
If the entire market is declining...then the fact that your share is
declining is of
  no particular note.'

Yeah, but even long term investors can benefit from basic money
management and sticking to your risk/reward plan.  If the market is down
2%, but your stock is down 5%,  something else is cooking. Each stock
has it's own volatility/risk, so they aren't going to act the same way.


  'If you buy a trading share then:
  If the share falls by more than a set amount, the trade has failed.
  Therefore you should sell'.

Exactly, good money management, executed by a stop loss. Where you set
the stop loss, 5%, 10% depends on your risk/reward and the individual
stock volatility, market conditions at the time and so on.


'Unless you have a  proper broker (to watch the market for you) you are
likely to miss a stop  loss and end up with a 15 to 20 % loss'.


Yep, thats why if your trading you should use a day broker (not an on
line broker) so you can set trailing stops to auto follow the stock.

cheers
j



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