Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Never Mind the Exceptions – Dump Your Losers Early.

By Malcolm Stacey

8 July 2014 07:47

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Hello Share Twisters: The most important advice in all Sharesville is ride your winners and dump your losers. I agree with that – though there are still a few difficulties with this rule.

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Comments

Malcolm Stacey

8 July 2014, 09:21

It’s been pointed out that the piece above rather contradicts my earlier article in which Adam Faith recommended a 7% stop loss. Well that was somebody else’s target, not mine, and there’s not much in it anyway. Maybe we should compromise at 8.5%.
wildrides

8 July 2014, 10:16

I think we get the main principle that your driving at anyways Malcolm.
My point would be that your tactic is correct because you can put your money to work else where rather than wait 2yrs for a recovery with your money tied up doing nothing. Then you can switch money back again to the losing share when the recovery trend shows on a graph .Infact I have a “losers watch list “ containing all the shares I sold or got stopped out . I watch that list for any that come back on upward trend and then buy back in , some times with a long term buy order in place . The point being that you bought that share in the first place so you must have done your due dilli on it . Thus you know an awful lot about that company . You can benefit from all the detailed research you did on that share at a later date . So long as you dont get tempted to revenge trade ……..ie a real change in trend has to have occured due to real changes in the company or its operating environment in order to make it a buy again .
A tip for beginners :- if you sellout of a share for the above reasons knowing that you like the company and wish to get back in when situations improve, then I would suggest retaining say 5 shares in your port for that company . That means the company stays in your port which you check every day and it forces you by default to monitor its price movements for a future entry. As opposed to being on a watch list which gets less frequent inspection.
Malcolm Stacey

8 July 2014, 11:00

Brilliant tip, Riders. Not thought of it before. Rocking on.