Frank, I've considered stop loss orders but the problem is that on the more volatile stocks such as QCOM, a stop loss is a good way to eliminate the possibility of a gain from a sudden upturn. If you look at the key factors in the price changes in QCOM, by far the greatest number over the past 18 months dealt with changes in recommendations by analysts with questionable credentials and perhaps self serving objectives. I can't predict when an analyst will downgrade a stock, or why. I can predict that when an analyst does change a recommendation, countless investors follow like lemmings going over the cliff. Following that advice is a good way to get killed in the market, or at least a way to get a good case of ulcers.
If you want to use a stop loss, I think you should assume that some definite changes in the quality of the investment suggest a sale. If so, then don't wait for a stop loss to kick in. Sell it now.
I'll add one more general comment. If you stay glued to the computer screen to maximize trading profits, you may actually succeed. But that strategy also limits the time one can spend researching other opportunities. I would rather create a balanced portfolio that includes a diversity of investments, not just a handful of hot stocks.
On the other hand, I do believe that one could create a sophisticated computer program that would buy and sell automatically, using an information base so large that only a computer could reasonably handle it in a short period of time. I am currently testing such a program. Who knows, I might become a short term trader before long! But right now, I want better performance than the average 1 percent per day gains that the test program has been giving.
Art |
