StockFetcher Forums · General Discussion · What To Do When Tragedy Strikes?<< 1 2 >>Post Follow-up
SFMc01
272 posts
msg #65706
Ignore SFMc01
8/1/2008 10:19:06 AM

Let's assume you are holding 5 or 6 really good stocks and the market plunges. Assume you have bought these stocks because your analysis concludes that they are going to move up soon, Value Line rates them as number 1 and Investors Business Daily puts them in their Top 100. You think you are in relatively safe issues.

Then, the market drops 100 points in the first 1/2 hour after opening and another 100 points by 10:30 am. Your holdings are down 4%.

Have you sold out before this point? Do you decide to just wait out the entire market action? Or, at what point do you dump & run?

Please share your thoughts about what you have done before and what you have concluded you will do the next time it occurs.

Thanks ... Steve

chetron
2,817 posts
msg #65708
Ignore chetron
8/1/2008 10:50:15 AM

PROTECT YOUR PROFIT AND DUMP, BUT DON'T RUN. YOU CAN ALWAYS REENTER IF IT IS ONLY AN ADJUSTMENT, IF IT IS NOT AN ADJUSTMENT. YOU HAVE YOU PROFITS IN HAND. MOVE ON.



rharmelink
81 posts
msg #65728
Ignore rharmelink
8/1/2008 7:21:36 PM

I'd have to disagree. If the market is dropping and stocks from the IBD top 100 are ONLY down 4%, things aren't that bad. Those are volatile stocks to begin with. If you bail out, you'll probably miss out on the bounce up.

For example, a Marketocracy fund based on top picks fromt he IBD 100:

http://www.marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/ps/FundPublicPage/source=EoDnDcCoEgOeMlMnMaKiAbDd

Granted, not a lot of history, but it's performed well during a strong down period.

miketranz
671 posts
msg #65738
Ignore miketranz
8/2/2008 2:42:12 PM

SFM,the first question you have to ask yourself is,what's my timeframe?How long am I going to be in this position?Are you a swing trader or a long term holder?The second question,once the market gaps down hard,whatever price your stocks open at,are they going down below the open print,or are they starting to go up? Use your open price as the "line in the sand".Again,depending if you're a long term hold,if the stock breaks the open low,you could lose alot more money than you think.More times than not,these morning gap downs often reverse on quality stocks & are a buying opportunity for some people.Also if the stock is in an uptrend,it might be a good time to add into the position,as long as it reverses off the open....

SFMc01
272 posts
msg #65757
Ignore SFMc01
8/3/2008 2:34:03 PM

Chetron & miketranz: Thanks. I usually enter a trade with the idea of grabbing a couple of percent and then getting out. Most often, I do this with stocks that I believe are good so that if I have to hold a night or two, I will still feel comfortable. I do feel comfortable in doing this when it is only a stock or two ... but not when most of them are down a lot because who knows what the market will do on opening following a bad day. To assume recovery is just pure gambling.

However, I've gotten hurt in the past when the entire market fell and I dropped through my usual 7% StopLoss on 4 to seven stocks in one day. In those instances, in retrospect, I would certainly have been better off if I gotten out sooner.

rharmelink: While I could have waited for recovery, at the time I have no idea whether the market is going to keep falling and I certainly can't afford a doomsday if that occurs.

So ... Chetron .. while I agree with you in general, respectfully, at what point have you found it advisable to dump everything and wait until the market recovers? 100 ponts? 150 points? somewhere else?

Thanks again ... Steve


SFMc01
- Edit message 8/1/2008 10:19:06 AM

Let's assume you are holding 5 or 6 really good stocks and the market plunges. Assume you have bought these stocks because your analysis concludes that they are going to move up soon, Value Line rates them as number 1 and Investors Business Daily puts them in their Top 100. You think you are in relatively safe issues.

Then, the market drops 100 points in the first 1/2 hour after opening and another 100 points by 10:30 am. Your holdings are down 4%.

Have you sold out before this point? Do you decide to just wait out the entire market action? Or, at what point do you dump & run?

Please share your thoughts about what you have done before and what you have concluded you will do the next time it occurs.

Thanks ... Steve



chetron
- Ignore chetron 8/1/2008 10:50:15 AM

PROTECT YOUR PROFIT AND DUMP, BUT DON'T RUN. YOU CAN ALWAYS REENTER IF IT IS ONLY AN ADJUSTMENT, IF IT IS NOT AN ADJUSTMENT. YOU HAVE YOU PROFITS IN HAND. MOVE ON.





rharmelink



SFMc01
- Edit message 8/1/2008 10:19:06 AM

Let's assume you are holding 5 or 6 really good stocks and the market plunges. Assume you have bought these stocks because your analysis concludes that they are going to move up soon, Value Line rates them as number 1 and Investors Business Daily puts them in their Top 100. You think you are in relatively safe issues.

Then, the market drops 100 points in the first 1/2 hour after opening and another 100 points by 10:30 am. Your holdings are down 4%.

Have you sold out before this point? Do you decide to just wait out the entire market action? Or, at what point do you dump & run?

Please share your thoughts about what you have done before and what you have concluded you will do the next time it occurs.

Thanks ... Steve



chetron
- Ignore chetron 8/1/2008 10:50:15 AM

PROTECT YOUR PROFIT AND DUMP, BUT DON'T RUN. YOU CAN ALWAYS REENTER IF IT IS ONLY AN ADJUSTMENT, IF IT IS NOT AN ADJUSTMENT. YOU HAVE YOU PROFITS IN HAND. MOVE ON.





rharmelink


rharmelink
81 posts
msg #65767
Ignore rharmelink
8/3/2008 7:24:14 PM

SFmc01 >> While I could have waited for recovery, at the time I have no idea
SFmc01 >> whether the market is going to keep falling and I certainly can't
SFmc01 >> afford a doomsday if that occurs.

None of us can afford a doomsday. And we will never know when it happens, until too late. But can you afford to miss the numerous recoveries when it isn't the doomsday?

Plus, just by virtue of investing in the WER stocks, you SHOULD be prepared for sharp declines. If not, they are the wrong investment method for you. They are among the most volatile stocks there are -- both upside AND downside. As the Marketocracy chart I referred you to should have shown.

Too many investors lose because they enter the market too late in a rally and exit at the first downturn and then wait to long to reenter. In essence, buying high and selling low. Ironically, for the risk averse, it is much easier to buy at a high than at a low.

SFMc01
272 posts
msg #65797
Ignore SFMc01
8/4/2008 9:07:36 AM

rharmelink: You state:
"None of us can afford a doomsday. And we will never know when it happens, until too late. But can you afford to miss the numerous recoveries when it isn't the doomsday? "

Respectfully, I really do appreciate what you say, but ... yes... I can afford to miss recoveries. Money missed is just not the same as money lost. On the other hand, as a margin player, if one doomsday occurs, i may be wiped our so deeply that I won't be in the market again anytime soon. Maybe the implication of your thought is that one just cannot be in these type of stocks and be heavily using margin player at the same time. I don't know and that's one reason I hope to gain from the experiences of others here.

Thanks again... Steve


TheRumpledOne
6,358 posts
msg #65798
Ignore TheRumpledOne
8/4/2008 9:18:29 AM

Only down 4%?

Or did you mean 40%?!?!?

4% isn't a big deal, you can make that back in one trade.





miketranz
671 posts
msg #65799
Ignore miketranz
8/4/2008 10:21:29 AM

Steve,money management is the key to lasting in the markets.Next time you buy a stock,buy it at a price that if your wrong you'll know it right away,and you can get out fast.In other words,if your buy criteria is a breakout,or a ma crossover over a certain number,if the stock no longer heads in your direction,you should scratch the trade.Forget about % loss.The % numbers your talking could bleed an account out real fast.Focus on the direction of the position.Large losses start off as small losses.The best and most profitable trades you put on will make a good move almost immediately.If your holding for a 1-2 day period,sell out when you see the stock spike up.Always remember,no one knows where the market is heading at any given time.Barring any large gap downs,the one thing that we do know and can somewhat control is our entry & exit methods.Its all about minimizing downside risk.The upside can take care of itself,if you know what you're doing.Trading is a numbers game.Keep your losses low,your profits high.Hope that helps,any questions,I'm here.Mike........

SFMc01
272 posts
msg #65805
Ignore SFMc01
8/4/2008 4:54:10 PM

TRO: Thank you for your interest. You wrote: "Only down 4%? Or did you mean 40%?? 4% isn't a big deal, you can make that back in one trade. "

Response: When my "holdings" are down 4% and I'm using a 4 to 1 margin (in a total of 8-10 stocks) ... that's 16% down on my limited assets. And, unfortunately, I've had that happen in one day when the entire market dropped a lot.

Usually, I do not set a stop loss as tight as 4% when dealing in the IBD 100 because, as others point out, the IBD 100 is a fairly volatile group.

However, I'm concluding ,based on what others are saying, that when the entire market is dropping ...not just my stocks ... I should just bail out fast. What do you and others think?




StockFetcher Forums · General Discussion · What To Do When Tragedy Strikes?<< 1 2 >>Post Follow-up

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