Cost averaging

[aggredior]

People mitigate risk differently. I believe $$MM$$ goes the diversification route. IF BEL does happen to disappear, that's only 10% or so off his portfolio.

I guess you are right. I just can't understand taking unnecessary losses. In the case of BEL, its chart gave strong sell signals.

Hopefully, I'm not coming off too strong. And I didn't mean this to be a critique of MrM's system, since I don't know much about it.

[Runner]

I choose the “cut it and run”, this fits with my style of trading. I’m only in a position from 1-20 days. I’ll accept the small hits as part of trading. I guess this averaging down thing works for some who plan on holding for a good while!!

[skiracer]

I've never agreed with his strategys but over time I have matured enough to realize that my discipline and strategys are not the only road to success. On top of that his site provides an outlet for constructive dialogue that everyone here can profit from. That by itself is unique and worthwhile. Tread your own path and keep your mind open to other lines of thought and everyone will benefit from the positive effect and dialogue that comes from that mentallity.
One thing that I really like about him is that he never trys to force his line of thought on anyone but sticks to his own disciplines. It would be a good thing for everyone to practice.

[IIC]

So, you missed by just-a-little-bit. By the way, really like your MrBreakout.com

Thank You...Doug

[mrmarket]

People mitigate risk differently. I believe $$MM$$ goes the diversification route. IF BEL does happen to disappear, that's only 10% or so off his portfolio.

Correct..and that's the only reason why I don't average down. I buy stocks for many reasons, but one important reason is that I love the company. So if I buy the stock, I like to stick with it. However, I don't love any company that much to put more of my hard earned capital into a higher percentage allocation of my total capital than it deserves.

All of the eggs in one basket can lead to dire consequences...I think that averaging down tends to mitigate the diversification insurance that I build in for my portfolio.

[RMAmmerschuber]

I thought you said it was a dead horse...........

I feel that if it is a stock you still believe in both fundamentally and in their business model, DCA is not bad....... but if That stuff changes........ drop it like a bad habit.

It is a dead horse meaning I won't put any more money into it than I already did. I would however increase my position in LU at the right price.

[lak]

It is a dead horse meaning I won't put any more money into it than I already did. I would however increase my position in LU at the right price.

completely agree!

[RMAmmerschuber]

completely agree!

That's not to say that if something changes in the company's model or fundementals that I would not consider DCA for capitalization of a rumor or take over. In the Nortel instance the best possible scenario is one of the above. Say I hold shares at $6.00 and an offer is tendered at $5.00 how do I benefit? I double my position at $3.00 and hopefully ride the wave to trim my current unrealized loss.

[RMAmmerschuber]

Well put excepting one point; if you had "doubled down" what would your profit have been when you did close the position.

There is nothing more frustrating to me than to watch a stock I go long with, based on belief, drop below the support level. On the other hand all investing is a risk so unless the fundamentals have changed adding to the risk is to me a strategy that can work in certain instances and not others.

[RMAmmerschuber]

Correct..and that's the only reason why I don't average down. I buy stocks for many reasons, but one important reason is that I love the company. So if I buy the stock, I like to stick with it. However, I don't love any company that much to put more of my hard earned capital into a higher percentage allocation of my total capital than it deserves.

All of the eggs in one basket can lead to dire consequences...I think that averaging down tends to mitigate the diversification insurance that I build in for my portfolio.

I never "Love" a company. My experience has proven everytime that love hurts! With the exception of my wife and children every time I "loved" anything be it real estate, automobiles, stocks and especialy a woman I let my emotions get in the way of rational decision making!

[RMAmmerschuber]

So it boils down to what your particular strategys and disciplines are rather than one way is right and the other way is wrong. Two sides to every coin.

And on each side of the coin is displayed a winner and a loser in the toss!

[RMAmmerschuber]

I guess you are right. I just can't understand taking unnecessary losses. In the case of BEL, its chart gave strong sell signals.

Hopefully, I'm not coming off too strong. And I didn't mean this to be a critique of MrM's system, since I don't know much about it.

"Risk" Is that not the exact word that brings us all together here? In trying to evaluate the initial position, limiting risk is our primary goal, but as we all know or are learning; risk is always prevelent in any investment.

I have determined that my best strategy is to except the fact that what I do know is most likely nothing at all! Any position I open is never 100% of the capital I am willing to pledge to that particular stock. This sometimes will limit my profit but also keeps me liquid enough to shake, rattle and roll when needed.

I subscribe to the belief that if I can't afford to lose it then it shouldn't be there in the first place. This is my way of limiting the emotional roller coaster days. Once I deposit those funds to my trading account I have already accepted the loss.

I hate to lose so if the stock declines I hold tight and try to capitalize on the future possibilities of why I opened the position to begin with.

No risk, no reward!

[RMAmmerschuber]

LAK

Some times it works and some times it dosen't. Cramer loves to average down. He was hyping CHTR in the 5-6 range and averaging down--now the stock is worth a buck and may file bankruptcy. You can say the same about NT, SUNW. LU, and on and on. These are dogs that only bite if you buy them.

You can really get hurt when ave. down fails. You can take a small loss and make it big. Generally, I would not use the method. It is a bad way to try and save a bad investment.

Global crossing the perfect example.

[lak]

Global crossing the perfect example.

You got that right.