Stops are for wimps

[spikefader]

Great! I think so too.

I'm going to give some thought to stops too.

Perhaps one would be wise tucked under the 100% retrace zone too. Let's face it, if that support area fails then it'll likely one of those rare duds and needs to be cut. It should work out to be about a 15% stop. I'll go back and see how that would 'fit' for trades he's already made, and trades that are open. From memory, none went down that low (except BEL of course). That way, you are guaranteed that even if you're not properly diversified, your max risk is only 15% of your position and you are protected against catastrophy. This is only initial thinking....... other thoughts welcome.

[fleetwood]

correct karel

I'm one year new to stock investing, and stops have consistiently knocked me out of numerous positions that would have done wonderful after I was out of the race. I 've had two stocks that have taken hugh hits without stops, but feel they are good companies and I will wait them out, liike Mr. Market. In the overall scheme of things for me, the winners still beat the losers 4 to 1 after a shake-up.

[billyjoe]

Mr. Market would have been stopped out of 28 of his 63 winners with a 8% stop. This includes 12 of 17 picks between August 2003 and January 12, 2004. More details will be posted shortly on a different thread.
billyjoe

[spikefader]

Mr. Market would have been stopped out of 28 of his 63 winners with a 8% stop. This includes 12 of 17 picks between August 2003 and January 12, 2004. More details will be posted shortly on a different thread.
billyjoe

Interesting!
Quick crude math assuming you diversified with 12 positions, of say 1k each position for each of calculation:
For winners only:
28 stop outs = -2240
35 winners = 5240
= 3000 profit.
Now for the losers....... how many current open positions would have stopped out??
All this not including slippage and fees of course.

[billyjoe]

Spike, All 13 of the current open positions have hit the 8% stop since purchase. This makes a total of 41 of Mr.Mkt's 76 picks since January 2002!
billyjoe

[Deaddog]

See the Stops are for wimps thread

Regards,

Karel

Karel:

I read through the thread.
I can see where the method can operate without stops.

The thread ended in 2004. Have you run the numbers recently? How did things go during the meltdown in 2008? I noticed that the records on the Home Page start in 2009.

I also noticed that there is a wide variation in Annualized Gain. Has any research been done into dropping a stock if it does not perform in a timely manner? Kind of a time stop. If the stock hasn’t hit the target in 12 weeks, sell and put the money to work in a better performer rather than wait for the stock to hit the target which may take several more weeks if not months.

Time is money. A 30% annualized gain will beat the market. A 200% gain kicks ths sh*t out of it.

[Karel]

Karel:

I read through the thread.
I can see where the method can operate without stops.

The thread ended in 2004. Have you run the numbers recently? How did things go during the meltdown in 2008? I noticed that the records on the Home Page start in 2009.

I also noticed that there is a wide variation in Annualized Gain. Has any research been done into dropping a stock if it does not perform in a timely manner? Kind of a time stop. If the stock hasn’t hit the target in 12 weeks, sell and put the money to work in a better performer rather than wait for the stock to hit the target which may take several more weeks if not months.

Time is money. A 30% annualized gain will beat the market. A 200% gain kicks ths sh*t out of it.

Deaddog, I copied your post to this thread to answer it here.

It is better than "can operate without stops". Stops would kill $$$Mr. Market$$$'s method. One of my points is that a method consists of BOTH an entry and an exit strategy. The very limited target of my research was to establish wether stops would improve the exit strategy of $$$Mr. Market$$$. They don't and they even harm the results. Other tweaks could be researched (and have been researched: see the retracement entry strategy). Feel free!

I should note that I use a time limited hold strategy myself and have dropped the 15% sell rule. Only when I am literally "following $$$Mr. Market$$$" and buy one of his picks do I follow his exit strategy.

As regards general slumps in the market, $$$MR. MARKET$$$ is OK when they happen. He doesn't sell and the overall good valuations guarantee a speedy recovery. This is not exact, but based on what I see in my own portfolio. The drops may be deeper than those of the market, due to the momentum character most picks share, but this is more than compensated by the recovery.

Of course much better strategies may exist. Do not hesitate to share them when you find them. Your HUGEness will be recognized.

Regards,

Karel

[smaskell]

Which better performer?

I also noticed that there is a wide variation in Annualized Gain. Has any research been done into dropping a stock if it does not perform in a timely manner? Kind of a time stop. If the stock hasn’t hit the target in 12 weeks, sell and put the money to work in a better performer rather than wait for the stock to hit the target which may take several more weeks if not months.

The problem testing this hypothesis is we don't have anything to compare it against. We would need to know into which stock you would transfer. MrM doesn't give an alternate pick with his winners. You would have to test against a known alternative. Perhaps rolling out of the unenergetic pick and spreading the recovered money between the remaining current holdings. That could be detrimental depending on your commission rates.
Also you could potentially just exit and double down on the next pick.
A number of options could be tested, the potential "better performer" would just have to be somehow identified ahead of time. I might look at doing a couple of these tests if I get some spare time after I deal with the tax man...

Scott