Great post, Chad. As far as I am concerned, the prime directive on all dog-chit exploration stocks is DON'T LOSE MONEY. Most of these stocks that run get ahead of themselves on speculative fervor, because there is so much money chasing such slim odds in this game. The timetable required to justify speculative values almost inevitably slips, by weeks, months, years....and the stock along with it. Often it is just one long, slow fall, and the value never materializes.
I don't EVER want to be in the position of averaging down in an attempt to mitigate my losses. I want to fully evaluate the downside risk ahead of time. I DON'T want to be holding a stock at a loss, whatever it's "inevitable" upside. I want the stock to go UP after I buy it. And if it doesn't, I'm going to have a mental stop set to cut my losses. If it falls through a reasonable stop, you can always get it at a lower price, often considerably lower.
The vast majority of these exploration stocks will never demonstrate true value, and that means that TIMING is a critical and most often, indispensable factor in making a profitable trade. Just a fraction of a percent of these stocks could ever justify a buy-and-hold rating! |
