You've said a bunch of things, not all of which I agree with. BTW, my post was to Bernard, asking what he personally does. However, to debate your points...
The system for placing stop losses should be according to your portfolio and the money management, thereof.
Yes.
That's why it is not a good idea to call out an opinion of where to place a stop loss because we all have different size and perspectives of how to run our portfolios.
If we know Bernard's system parameters, than it's a smart thing to know where he places stops. Also, many people use areas of support as places to put stops. I'd like to know if that's his technique. It's a good idea to know those things, IMO.
The key to trading is to remember that the market is a forum for making money. Not the worlds largest casino. We need to remember that once you reach the strike price (decided upon before you take the trade) you cash out.
Don't know if I agree with your sentiments there. It's fine to have a system where you, for example, decide to sell when your stock has gained x% or lost y%. It's also fine to use trailing stops. I don't agree with you that using trailing stops and therefore not having a strike price guarantees failure or lesser performance. If you've done backtesting and have found that to be true, then let me know and I'll pay attention. However, just saying it is so with nothing to back it up doesn't convince me that it's true.
As for the casino metaphor, it is indeed like a casino. Nothing wrong with that. The key is knowing when the odds are in your favor so you're like the house and not like the clientele.
Once your total portfolio has reached its own strike price, a predesignated amount of money is moved to a safer vehicle. Then that safer vehicle is added to incrementally as the portfolio grows over time. Money is moved to accumulate there and the trades are used to grow the safer vehicle.
I disagree. What is a safer vehicle? Is cash always safe when you consider inflation? Aren't there periods of time when you'd lose by making less in cash (considering the tax rate) than the rate of inflation? Isn't it better if you have a system that works to keep using it? One trader profiled in the book Market Wizards figured out that he would make a minimum of 20% per year if he followed this technique he discovered. It worked. Gary B. Smith of thestreet.com says he's never made less than 40%, I think it is , in the last 11 years using his trading techniques (max. was 90%). If you believe that that's true, why would you automatically stash money in cash (acutally, he goes to cash when his conditions for trading aren't being met)? One of the best investment letters--Al Frank, The Prudent Speculator, I think, uses margin. And one can be hedged by being both long and short so catastrophic events won't have catastrophic results. So, bottom line, I don't buy your premise about using "safer vehicles". I think it's a matter of odds and managing the odds. The safest place to have your money is where the odds are in your favor and the downside risk is managed. |
