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Please forgive me if I am re-introducing a subject that has been discussed before, but I'd like to get a clear view on how you mitigate the risk as stops are not favored in the "vanilla" Mr.Market methodology.
I realize that the positions that are taken are fundamentally strong companies, and as such could be considered for holding a long time. I.e. if the trade goes against you, you can just sit tight and know that you own a great company that investors would anyway own for years.
Another way of minimizing risk is to hold a portfolio and diversify the market risk on several stocks.
But when would you actually liquidate your losing position? Based on what kind of knowledge?
If the company has had awesome revenue growth and earnings the past few years, but then suddenly stops performing after you purchased its stocks. If the following year was a losing year? If you had owned Nokia and you saw Apple taking market share? What then?
And what about general market conditions, e.g. the Financial Crisis - did this affect your positions?
Are you just confident enough that even if you would lose the entire position (in any one trade, e.g. company bankrupt) you would still be profitable over time. E.g. if your capital is 100.000 spread over 10 trades with 10K each. Even if you would lose full 10K in one company you would be winning overall.
I realize that the positions that are taken are fundamentally strong companies, and as such could be considered for holding a long time. I.e. if the trade goes against you, you can just sit tight and know that you own a great company that investors would anyway own for years.
Another way of minimizing risk is to hold a portfolio and diversify the market risk on several stocks.
But when would you actually liquidate your losing position? Based on what kind of knowledge?
If the company has had awesome revenue growth and earnings the past few years, but then suddenly stops performing after you purchased its stocks. If the following year was a losing year? If you had owned Nokia and you saw Apple taking market share? What then?
And what about general market conditions, e.g. the Financial Crisis - did this affect your positions?
Are you just confident enough that even if you would lose the entire position (in any one trade, e.g. company bankrupt) you would still be profitable over time. E.g. if your capital is 100.000 spread over 10 trades with 10K each. Even if you would lose full 10K in one company you would be winning overall.
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