Comments on: Investment Success Means Cutting Losses

By: Max

Max — Sun, 10 Feb 2008 08:57:09 +0000

I think using the R-multiple method is the best way to measure risk on a position to cut losses.

Essentially 1R = amount of money you expect to gain on the trade at minimum, 2R = double that

The goal is to keep your losses no worse than -1R per round-trip trade. Ideally your profits are able to run producing multiple R gains on the winning ones.

By: 13 Questions That Will Boost Your Investment Portfolio - Stock Trading To Go

13 Questions That Will Boost Your Investment Portfolio - Stock Trading To Go — Thu, 11 Oct 2007 17:13:53 +0000

[...] your portfolio diversification works, and it is a matter of managing it with a stop loss and cutting your losses. Do you own 5 stocks or 50 right now? Could you sell some stocks that are not up to [...]

By: Blain

Blain — Wed, 20 Jun 2007 16:03:16 +0000

On blogging? email me and we’ll talk

By: Zachary Scheidt

Zachary Scheidt — Wed, 20 Jun 2007 04:00:34 +0000

yeah – just getting it up and running. I find it helps me to express my thoughts and come up with clearer more succinct reasons for my positions and I enjoy the comments that help me think through points i may not have pondered yet.

Any tips for a newbie like me?

By: MillionDollarJourney.com

MillionDollarJourney.com — Tue, 19 Jun 2007 15:36:11 +0000

Yes, I should have explained that it is more of a money management technique that can incorporate your 6-8% stop loss strategy.

By: Blain

Blain — Tue, 19 Jun 2007 15:11:38 +0000

ahhhh, ok on the same page now. Thanks for the extra explanation, that actually makes a lot of sense

By: MillionDollarJourney.com

MillionDollarJourney.com — Tue, 19 Jun 2007 15:05:25 +0000

Hey Blain,

I don’t think I explained it properly. If you set your stop @ 8% of a $10 stock, that means that you can let your stock fall to $9.20 before selling (risking $0.80/share). ACcording to Elder, if you have a $10,000 portfolio, you can risk up to 2% of it/trade which is $200, which in this case means you can purchase a maximum $200/0.80 = 250 shares without risking more than 2% of your portfolio.

By: Blain

Blain — Tue, 19 Jun 2007 14:35:56 +0000

that can get tricky though I think from personal experience. It really depends on what stocks you are buying, when, and at what price. For instance if a stock gaps up 5% and you buy in at the open, there is a very high probability of the stock retracting 1 – 2% intraday before climbing back up, which then kicks you out of your position. Really for it to work you have to buy the perfect stock, that simply never will fall below your buy point, thats tough.