H3==You mentioned different perspectives on protecting profits. Don't know if this helps anyone, but I once heard a money manager say his rules required giving back no more than 25% profit on a position once it was up by 5%. Examples: 5% profit=$5000, he's out if it dips to $3750; 5% profit=$1500, he's out if it hits $1125.
He then adjusted to a different maximum profit percentage giveback once a position was up 10%, then again incrementally as and if it moved higher. I don't recall exact percentages used. His goal was to give a stock room but not leave as much on the table as a stop farther away from where it was trading might.
Maybe someone here knows this system, or might devise a similar one. I don't know what he did with a stock up, say 3% that began moving against him. Also, he wasn't a trader. But a similar technique ought to work when trading also, if it's not too cumbersome to calculate and enter via trailing stop or whatever.
His rules also required selling any new position down 10%, no exceptions. (His version of stop loss.) As Bum has pointed out many times, with a short time frame, you can't wait 10% before playing defense...maybe 2-3%.
Seeing profit evaporate (quickly, usually) is the pits. One of the first books I ever saw on the market quoted an old-timer saying he always made money in the stock market selling too soon. Lot of wisdom there. It's aggravating to see what you "coulda, woulda, shoulda" made if only you'd sold before most of your profit disappeared on the way to hitting your stop.
The other side of that is seeing one reverse and move sharply higher AFTER you've protected a nice profit and sold. I've been an all star in the past at this, LOL. Also part of the game, but a part no one likes to see....but it can be helped by selling partial positions. |
