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Portfolio123 » List all forums » Forum: Simulations and Portfolios » Thread: stop losses |
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tevans9129
Member
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I'm a real rookie at investing, so please keep this in mind when you read my questions. Some of the model portfolios look very promising and in fact I've put some real money into one of them, the balanced small cap, but have a question. Does any one use stop losses relative to the stock price on these portfolios are is the ranking system used for this purpose? If stop losses are used, what would be a good starting point, percentage wise, on the above portfolio and could you direct me to information on how to accomplish this in the portfolio? Remember all of the technical jargon is new to me so specifics would be greatly appreciated. Since my funds are limited, I used 30 stocks rather than the 50. I'm assuming this will make it more volitile but hate to go any less on the number of shares. Thanks for your ideas and thoughts. Ted |
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flu
 UNITED STATES Joined: May 13, 2003 Posts: 16 Status: Offline |
Ted, I think this is a great question. Stop Loss rules have been a matter of discussion here within our office as well. Unfortunately, I don't have a concrete answer for you. With that said, I think it depends on how you want to trade, and what you are comfortable with. I've read from some traders that their stop loss is 10%. This is a very gusty, "I never lose" statement. I personally think this might work for a day trader, but it certainly will not work in an automatically traded, long-term portfolio. With this philosophy you're turnover rate (commissions and taxes) will certainly kill your performace. We've backtested several scenarios for the time period which we have, and it seems like 55% was ideal. But keep in mind what historically would have worked, might not work for the future. And last of all, the portfolios at P123 are rank-based. Some here would suggest that you do not define a price-based stop loss at all. But that you should only sell if the rank drops below a certain point. IE. you have only one sell rule, "sell if rank < 80" for instance. With that said, you then need to watch your stocks carefully, because if there is a corporate incident (such as a scandal or criminal action) then the ranking system maybe too slow to pick up on this. In these special cases, you might want to override the system and sell. I hope that helps. Feel free to comment. ---------------------------------------- Francis Lu |
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tevans9129
Member
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Francis, thank you for your comments and explantations. I've been tracking the one portfolio that I have real money in with a 10% stop loss and 10% does not seem to be a good rule. At least on this group of stocks. They can go down 10% but reverse in short order. I like your suggestion of using the rank but over riding it when necessary. Thanks again for your response. Ted |
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bob0341
Member
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Stop losses would strictly apply to day traders or even swing traders not portfolio managed stocks. If you're worried about events then sign up for stock news alerts from a number of websites like marketwatch.com. |
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woofles
Member
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Also very much a beginer. I have tried to get my stop loss level right in this difficult market. Looking back over my (disapointing) results recently, it is clear that my 5% crawling stop loss sold stocks that went on to make money. Additionally my (normally good but expensive broker)did not operate the stop when RENNE was suddenly delisted and I lost a packet. Currently I am buying very carefully and resisting any speculation. The result is a bit like watching paint dry and I crave for action and excitement. Fortunately I am frightened of my wife seeing my losses so that keeps me on the streight and narrow! |
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