From: Olga Bourlin (fauxever@sprynet.com)
Date: Sun Jun 15 2003 - 23:29:45 MDT
From: "gts" <gts_2000@yahoo.com>
> Olga Bourlin wrote:
>
> > So, you advice to me would have been not to use a stop to get
> > out of CREE Friday, so that rather than losing @$50 on my 300
> > shares, I should have held on to CREE and lost $1,233 by the
> > end of the day (and who knows what Monday may bring)?
>
> Yeah, assuming your numbers are right then you would be hating me right
now
> for my advice.
> However on average the many hundreds of clients I served over the years
> would have loved me for providing similar advice. In general it is foolish
> to sell automatically just because of a drop in price.
Depends on the news.
> More often than not,> it is a good opportunity to buy.
I don't disagree (and remarked how some people bought and made money off the
dead cat bounce on CREE). But as the news was about possible fraud, I would
not have felt comfortable holding CREE into Monday. Even if I bought CREE
at the lowest of the day on Friday ($15.65), I would have hoped to sell it
later that day, but in any case would not have held the shares into next
week.
> For example I was there riding the saddle on "Black Monday", October 19,
> 1987, when the market dropped something like 12% in one day. People who
got> stopped out on that day now look like idiots. And the truth is that
they
> really were idiots. Anyone who deviates from the buy and hold strategy is
> living in a pipe dream.
They were not idiots - they were smart. There was nothing preventing them
from re-entering positions later at a lower rate (and they would not have
been dragging the percentage losses with them). Example: If one has a 1000
shares of stock for $50 with a stop loss at $48, and a stock tanks to $37
... the stock holder loses *$2,000,* but is then in a much better financial
position to re-enter the stock at $37 if they so choose (because they would
not be *$13,000* in the hole if they had held the stock from the $50 range).
Last year two stocks with which I am very familiar - THC and DKWD - tanked,
and then tanked some more big time. I've re-entered and played both of them
since (when DKWD was under $10, and THC was - as it still is - in the
teens). Had I held THC from the $40+/share price, and DKWD from my original
almost $30/share levels, I would have been a bagholder for the huge
percentage gains - totaling tens of thousands of dollars. Instead, I took
limited losses on both stocks, and have since traded both to the tune of
many profitable trades at their present levels, so overall am up on both of
them.
Stop losses kept me "in the game" to trade another day ...
Olga
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