Comments on: Reader Responses: Buy High, Sell Higher or Buy Low, Sell High

By: StockTube

StockTube — Wed, 27 Jun 2007 09:07:36 +0000

to me, first level of defence is always stop-loss … but if you don’t like the idea, then average down could be your choice if the stock defies your prediction …

but ALWAYS study the fundamental of the stock even though you’re die-hard fan of technical analysis … warren can’t be wrong after decades in fundamental analysis, can he?

cheap stocks are there for a reason, else it won’t be cheap at the first place …

but then, it’s just me …

cheers

By: MoneyNing

MoneyNing — Tue, 19 Jun 2007 00:33:43 +0000

That’s a good plan. Good luck! I’d like to see more reviews of Zecco since I have been wanting to make one. I love my eTrade account though since there is no paperwork and administrative stuff are very efficient and well thoughout (easy through the website UI).

By: Sun

Sun — Tue, 19 Jun 2007 00:20:46 +0000

“separate your investments with your trading” that’s the right idea. In fact, I won’t touch anything that I have owned for years with the stop loss, trailing stop, etc, trading strategies. I recently opened a Zecco account and planed to transfer a couple of thousands over there to do the active trading. Those long term investments are “buy and hold.”

By: MoneyNing

MoneyNing — Mon, 18 Jun 2007 23:55:04 +0000

I think ultimately, you need to separate your investments with your trading. You do all the stop-loss, trailing stop, limit buy etc etc with your trading.

If you are in it for the very long term, buy and hold etc, then focus on buying companies that can grow long term.

By: Sun

Sun — Mon, 18 Jun 2007 23:44:59 +0000

MoneyNing: I have never used stop loss in any trading so far. I usually hold the stocks for quite long and let them go through the ups and downs. But now I may want to try the idea with some “play” money and see how it works.

By: Roundup for week of 10 June 2007 at Mighty Bargain Hunter

Roundup for week of 10 June 2007 at Mighty Bargain Hunter — Mon, 18 Jun 2007 13:14:25 +0000

[...] The Sun’s Financial Diary talks about reader responses to a post about buying and selling XFML. [...]

By: MoneyNing

MoneyNing — Mon, 18 Jun 2007 04:09:29 +0000

I think the stop loss is a great idea (even though I have never used it). The stop loss helps keep one disciplined, which is the most important thing a stock trader needs. The stop loss is totally independent of whether you will buy a stock back or whether you think it will go up or down the next day. It is just so you don’t get stubborn.

Once the stock is out of your portfolio, you can always re-assess whether or not it is worth owning. It helps clear your mind sort of speak.

By: Weekend Personal Finance Review

Weekend Personal Finance Review — Sun, 17 Jun 2007 20:44:14 +0000

[...] Financial Diary asks if you would chase a stock lower. I think the conventional wisdom says that you shouldn’t buy something that continuously goes [...]

By: Sun

Sun — Sun, 17 Jun 2007 19:23:15 +0000

Thanks for everybody's comments. I agree that a stop lose can limit the damage, but what if the drop has nothing to do with the business the company is running? If the drop is temporary, do you have plan to buy it back if the price dropped to a level that you think it's very attractive and could rebound once the cloud is cleared? The stock price can be driven by lots of random events, and if the sell is just based on whether a pre-set threshold is reached, you may miss a good buying opportunity if you still feel the stock has values. In many cases, the lose is temporary.

nobody knows exactly what price is considered "low" and what price is seen as "high." There are many random events that can affect the stock price either way very quickly without any fundamental changes at the company. In these cases, applying any analysis probably won't help because the stock doesn't really follow any patterns that can be explain by analysis. For me, I will keep the stock even if I gain more than 20% if I feel it has potentials to go even higher.

By: MoneyNing

MoneyNing — Sun, 17 Jun 2007 15:51:53 +0000

You will always get an argument on both sides that seem logical since the answer is “depends” as the market is so unpredictible. I think if the sector is still in favor and the market is going up, the buy high, sell higher scheme works better.

The buy low, sell high works well for a stock that just plummeted and you can pinpoint the reason why it did. Of course you then have to totally dis-agree with that reason, otherwise, you might get burned really bad since some stocks can go lower, and lower, and lower day by day until you lose so much money it doesn’t matter if you sell it or not at that point.

By: KMull

KMull — Sat, 16 Jun 2007 22:39:57 +0000

It depends on the fundamentals. Why did the stock drop 50% in a day? Is this news being overreacted to? If the fundamentals are still there, especially if it has a high return on invested capital… I’d buy more.

By: TFB

TFB — Sat, 16 Jun 2007 05:28:39 +0000

You won’t have this problem if you don’t buy individual stocks in the first place. Stick with mutual funds and ETFs.

By: James

James — Fri, 15 Jun 2007 21:37:53 +0000

As has been said, a stop loss order. Preferably a trailing stop so you can somewhat protect any gains that DO occur.

Do you still stand the chance of losing money? Of course…you have to pick some percentage below the current price, and without a reasonably sized gap, you risk triggering a sell just because the market has a blip.

But 50%? Yeah…my stop loss on just about any stock or etf in the world would be less than that.

By: dong

dong — Fri, 15 Jun 2007 21:37:41 +0000

I agree withe suggestion on the stop loss order. Sometimes you need to get out of stock regardless of what your fundamental view of the stock, especially if you have liquidity concerns. That said I’ve often brought stocks again as it’s dropped for exactly the same reason cited – nothings changed in my attitude or the news. This has generally worked out quite well but that’s more function of the the type of stocks I’ve purchased. I’m very much a value investor so when I have a good margin of safety on the purchases I do make. I’ve gotten burned using the same strategy especially when I was a younger investor because I chose to either ignore the news or rumors and chose to double down when the dealer was showing an ace. If there’s a reason a stock is dropping, you should get out…

By: zeron

zeron — Fri, 15 Jun 2007 15:57:06 +0000

never buy a stock without a stop loss. i always put a stop loss base on the previous swing low.

By: Jon @ TheMoneyMythos

Jon @ TheMoneyMythos — Fri, 15 Jun 2007 15:26:50 +0000

My approach is pretty simple – put a stop order at 20% below my purchase price. I borrowed that approach from the investment company I work for, and it seems to me it’s a simple, straightforward method of cutting your losses short and focusing on the big gains.