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22-10-2013, 05:41 PM
(This post was last modified: 22-10-2013, 05:42 PM by Temperament.)
(22-10-2013, 05:38 PM)Clement Wrote: (22-10-2013, 04:58 PM)Temperament Wrote: (22-10-2013, 04:00 PM)Clement Wrote: Let's examine the possibilities. (This discussion only applies to stocks which are reasonably liquid.)
1) You made a mistake and bought garbage. Stop losses prevent you from losing further by forcing a sale. For example those who bought Blumont etc who have stops.
2) You bought a good stock and poor market sentiment causes it to drop, triggering margin calls and contra forced selling by others. Stop losses enable you to exit first, take stock and re-enter at a lower price, giving you the same exposure and some surplus cash. There are numerous such incidents recently especially during the "fed tapering fears" period.
3) You bought a good stock and a flash crash occurs. You get stopped out at a low price and the market rallies without you. This is the only case where it is disadvantageous to have a stop loss. The Minzhong incident is the only recent such incident that comes to mind, where stopped out investors were unable to re-enter and benefit from the Indofood offer due to trading halt.
How often does a Minzhong situation come about? In all fairness, Stock Market is a place where what seems impossible is possible. If only we know when the impossible is possible. Or if you can think the unthinkable then the unthinkable is not unthinkable after all. .
All the more necessary for a stop loss. Imagine news of a terrorist attack or something while you're in the toilet. O. K.
May Stop Loss help you to make a lot of money.
Just be careful of "WHIPLASH"
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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(22-10-2013, 05:41 PM)Temperament Wrote: (22-10-2013, 05:38 PM)Clement Wrote: (22-10-2013, 04:58 PM)Temperament Wrote: (22-10-2013, 04:00 PM)Clement Wrote: Let's examine the possibilities. (This discussion only applies to stocks which are reasonably liquid.)
1) You made a mistake and bought garbage. Stop losses prevent you from losing further by forcing a sale. For example those who bought Blumont etc who have stops.
2) You bought a good stock and poor market sentiment causes it to drop, triggering margin calls and contra forced selling by others. Stop losses enable you to exit first, take stock and re-enter at a lower price, giving you the same exposure and some surplus cash. There are numerous such incidents recently especially during the "fed tapering fears" period.
3) You bought a good stock and a flash crash occurs. You get stopped out at a low price and the market rallies without you. This is the only case where it is disadvantageous to have a stop loss. The Minzhong incident is the only recent such incident that comes to mind, where stopped out investors were unable to re-enter and benefit from the Indofood offer due to trading halt.
How often does a Minzhong situation come about? In all fairness, Stock Market is a place where what seems impossible is possible. If only we know when the impossible is possible. Or if you can think the unthinkable then the unthinkable is not unthinkable after all. .
All the more necessary for a stop loss. Imagine news of a terrorist attack or something while you're in the toilet. O. K.
May Stop Loss help you to make a lot of money.
Just be careful of "WHIPLASH"
Stop losses don't help me to make any money. The point is, they don't cause me to lose any money either.
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If buying a stock gives so much worry then maybe it would be better not to buy in the first place.
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(22-10-2013, 06:43 PM)smallcaps Wrote: If buying a stock gives so much worry then maybe it would be better not to buy in the first place.
How is this relevant in the discussion? This is simply a discussion on the merits and demerits of stop loss orders in general.
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(22-10-2013, 07:11 PM)Clement Wrote: (22-10-2013, 06:43 PM)smallcaps Wrote: If buying a stock gives so much worry then maybe it would be better not to buy in the first place.
How is this relevant in the discussion? This is simply a discussion on the merits and demerits of stop loss orders in general.
IMO, no merits loh, to a value investor. Will have to put the stop loss at 100% anyway...
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(22-10-2013, 06:12 PM)Clement Wrote: (22-10-2013, 05:41 PM)Temperament Wrote: (22-10-2013, 05:38 PM)Clement Wrote: (22-10-2013, 04:58 PM)Temperament Wrote: (22-10-2013, 04:00 PM)Clement Wrote: Let's examine the possibilities. (This discussion only applies to stocks which are reasonably liquid.)
1) You made a mistake and bought garbage. Stop losses prevent you from losing further by forcing a sale. For example those who bought Blumont etc who have stops.
2) You bought a good stock and poor market sentiment causes it to drop, triggering margin calls and contra forced selling by others. Stop losses enable you to exit first, take stock and re-enter at a lower price, giving you the same exposure and some surplus cash. There are numerous such incidents recently especially during the "fed tapering fears" period.
3) You bought a good stock and a flash crash occurs. You get stopped out at a low price and the market rallies without you. This is the only case where it is disadvantageous to have a stop loss. The Minzhong incident is the only recent such incident that comes to mind, where stopped out investors were unable to re-enter and benefit from the Indofood offer due to trading halt.
How often does a Minzhong situation come about? In all fairness, Stock Market is a place where what seems impossible is possible. If only we know when the impossible is possible. Or if you can think the unthinkable then the unthinkable is not unthinkable after all. .
All the more necessary for a stop loss. Imagine news of a terrorist attack or something while you're in the toilet. O. K.
May Stop Loss help you to make a lot of money.
Just be careful of "WHIPLASH"
Stop losses don't help me to make any money. The point is, they don't cause me to lose any money either. Very Interesting.
Can we consider "Auto Stop Loss" as one of the tools we use in the stock market? If this is a tool that neither help nor hinder us for making money then why use it? Can you elaborate why it is a "useless tool" for making or losing money. Interesting.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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It is not a useless tool. It is a contingency tool that most of us hope we never have to use. Putting a stop loss does not mean we hope it will trigger. As much as we try to avoid making investment mistakes, they do happen. A stop loss just prevents our investment mistakes from losing us too much money. Does that help or hinder us in any way when the point is to TRY not to lose any money at all.
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(22-10-2013, 08:28 PM)Clement Wrote: It is not a useless tool. It is a contingency tool that most of us hope we never have to use. Putting a stop loss does not mean we hope it will trigger. As much as we try to avoid making investment mistakes, they do happen. A stop loss just prevents our investment mistakes from losing us too much money. Does that help or hinder us in any way when the point is to TRY not to lose any money at all.
IMO, the tool is not useful for value investors. Value investors focus on value, than price, but "stop-loss" works on price alone.
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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(22-10-2013, 08:34 PM)CityFarmer Wrote: (22-10-2013, 08:28 PM)Clement Wrote: It is not a useless tool. It is a contingency tool that most of us hope we never have to use. Putting a stop loss does not mean we hope it will trigger. As much as we try to avoid making investment mistakes, they do happen. A stop loss just prevents our investment mistakes from losing us too much money. Does that help or hinder us in any way when the point is to TRY not to lose any money at all.
IMO, the tool is not useful for value investors. Value investors focus on value, than price, but "stop-loss" works on price alone.
True. However price is not useless as it is the market's best estimate of it's current value. We might have a different opinion but I think it is unwise to discard the market view entirely. The question is how sure are we that we have covered all the bases and found value and how large of a loss do we face if we are found to be wrong. After a certain point, I think it is wise to stop and re-examine our thesis again and a stop loss enables us to do so without exposing us to further losses. If we find it satisfactory, we can always buy back in.
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(22-10-2013, 08:47 PM)Clement Wrote: (22-10-2013, 08:34 PM)CityFarmer Wrote: (22-10-2013, 08:28 PM)Clement Wrote: It is not a useless tool. It is a contingency tool that most of us hope we never have to use. Putting a stop loss does not mean we hope it will trigger. As much as we try to avoid making investment mistakes, they do happen. A stop loss just prevents our investment mistakes from losing us too much money. Does that help or hinder us in any way when the point is to TRY not to lose any money at all.
IMO, the tool is not useful for value investors. Value investors focus on value, than price, but "stop-loss" works on price alone.
True. However price is not useless as it is the market's best estimate of it's current value. We might have a different opinion but I think it is unwise to discard the market view entirely. The question is how sure are we that we have covered all the bases and found value and how large of a loss do we face if we are found to be wrong. After a certain point, I think it is wise to stop and re-examine our thesis again and a stop loss enables us to do so without exposing us to further losses. If we find it satisfactory, we can always buy back in. This is almost like saying it doesn't matter if i get it wrong, with stop loss i will have the chance to get it right. i believe maybe you are a specialist in "STOP LOSS". Can it be so easy? i find it quite difficult leh.
Of course hindsight investing is perfect to use stop loss.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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