Cutting losses - not the best idea
- Thread starter mrmarket
- Start date
Another point.... ... he ADDS funds to his account so he
can pick another winner.
If we started with say 100K, and put 20K per position, it wouldnt
take long before we got all 5 of our revenue streams STUCK
in open holding positions.
If I am allowed to add another 20K to the account whenever
I want, then "49 wins in a row" is trivial, because all my losers
get labeled "open and holding" instead of LOSERS, as I rack
up MORE winners by adding money and taking new positions.
Take ***ANY*** 50/50 trading system, and you will get these results.
Completely worthless information. He needs to plot his
equity curve WITHOUT ADDING funds to his account, and then
we can get a REAL idea of what his performance his.
peace
axeman
can pick another winner.
If we started with say 100K, and put 20K per position, it wouldnt
take long before we got all 5 of our revenue streams STUCK
in open holding positions.
If I am allowed to add another 20K to the account whenever
I want, then "49 wins in a row" is trivial, because all my losers
get labeled "open and holding" instead of LOSERS, as I rack
up MORE winners by adding money and taking new positions.
Take ***ANY*** 50/50 trading system, and you will get these results.
Completely worthless information. He needs to plot his
equity curve WITHOUT ADDING funds to his account, and then
we can get a REAL idea of what his performance his.
peace
axeman
With that mentality why not just buy a group of stock indexes and hold them forever and ever and ever. And even when you are down in any of the positions, just claim you are holding. The market goes up in the long term so how can you lose?
You were around when mrmonkey first appeared, you know, before the rally. His return was like 3% a year at the time. Wow amazing! And even now his return sucks cause the S&P and Naz for the same period of time destroy his "record".
You were around when mrmonkey first appeared, you know, before the rally. His return was like 3% a year at the time. Wow amazing! And even now his return sucks cause the S&P and Naz for the same period of time destroy his "record".
When I took a "snapshot" of his alleged positions last November, the average term was 113 days. The average return was 12.6%. 113 is approx. 47% of the annual number of trading days, which would make his annual return about 26%, if he continued with the same results. That's a cautionary 'if', because as gains/losses mount and decrease, and as his holding time changes from trade to trade, obviously the annual return will differ. But if you peg it as of 11/10/03, we could state that that rate of return would yield about 26%, wins and losses combined. That's not to say that's what he does every year, again, that's just a snapshot based on holdings at that moment. You may feel 26% is the pinnacle of achievement, others may not think so. Regardless, a big, big extra factor with that method is the constant need for capital infusions (there were 14 additional infusions) to capture new opportunities (because capital is tied up indefinitely while holding declined positions), which makes the investing style more expensive as it creates an unseen cost. Additionally there's a secondary unseen cost because capital kept out of use in what could be gainer opportunities in the interim prevents booking those profits.
Now, if you're running a mutual fund and you've got cash coming in by way of customers, that's one thing to hold said losing positions. But if you're just a guy and gotta take the new capital out of your paycheck or savings, then it's not the best plan for family money management, and wifey is sure to complain about your pulling it out.
Even fellow Wharton MBA'er Lynch, who also didn't believe in stop losses, did believe in and practiced trade rotation: getting out when the 'story' or fundamentals changed, rather than at a predetermined percentage or price point, and putting the capital to work in a better opportunity, rather than keeping capital in holding losses till target or bust. Even then, he saw a number of holdings bust, but given that he held 1400 positions in America's greatest bull market ever, he could still come out ahead.
A side note. The thing about basing investing on FA, and then declaring as a result of that, '15% in 4 to 6 weeks', is a dichotomy of FA and TA. While FA may base how a stock is valued, supply/demand, and its perception of that supply and demand, is what causes a stock to be priced differently every day and throughout the day, right? Otherwise, given that the fundamentals haven't changed over the period, the stock's price shouldn't change either. So why would any FA lead one to determine that the stock will now gain 15% in a certain time period, simply because it's now made an appearance on a stock screen? That strikes me of TA.
Gentlemen:
I am not saying I love his method or would use it myself...I wouldn't;t....but come on....he has done pretty well over the last year...I would not hold the losers....he's letting pride and his so called " streak" get in the way of sound principals of investing/ trading....but he has done a good job of going out on the limb and picking stocks.
I am not saying I love his method or would use it myself...I wouldn't;t....but come on....he has done pretty well over the last year...I would not hold the losers....he's letting pride and his so called " streak" get in the way of sound principals of investing/ trading....but he has done a good job of going out on the limb and picking stocks.