The problem I see with buying an RRI at $5.50 and watching it drop to $4.50 is that it isn't using very good money management or loss control techniques.
We don't know that the price won't drop lower. The lower it goes, the greater the rise must be to make a profit.
If it goes to $4.50 and starts to rise, I can always buy it back. I sold at $5.20. If it goes to $4.50 and starts to rise, it will be showing strength at $4.80. I can buy it back there and have a profit when it gets back to my buying point. If I miss the $5.20 mark, on the way back, I can buy an even larger position than I had, with confidence, and end up making a greater profit, "WITHOUT THE RISK," in the long run.
Those who don't practice good loss control techniques will tell us about the one that worked for them. We won't hear about the many that don't.
You can't show consistent profits if you don't manage losses. We can have lower profits per trade and still out-perform many people who report a huge gain on an RRI or other company because they have huge losses to overcome before they can show a profit. We will even hear how a PGO is up 100% over the last month. We won't hear they need another 200% to break even. Even if a PGO makes them whole, they won't learn anything from the experience. They'll make the same dumb mistakes again and one of those mistakes will take them out of the game eventually. MIR will be another example, watch!
Then there's "opportunity risk." Money tied up in a losing position that can be earning money elsewhere. Very few people take the "time value of money" into consideration when they wait for their mistakes to correct.
While in the Marines, we were encouraged to "take the pain." It's from that pain that we learned not to make stupid mistakes. Mistakes that could cost us more than our money.
I've made lots of stupid mistakes over the last few years. Some of them hurt. By taking the pain, (losses), and learning from the experience, I think it has made me a better trader/investor.
All in my opinion, of course.
dabum |
