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Strategies & Market Trends : Contrarian Investing -- Ignore unavailable to you. Want to Upgrade?

To: zx who wrote (107)	9/14/2006 2:13:49 PM
From: jsabelko	Respond to of 4080

Hi zx. Right now I'm only up about 15% for the year. Good question on stops and risk. The use of stops comes to my biggest issue and that is how to know when to sell. I'd love to have a discussion on this topic. I honestly don't use stops until i have a sizeable gain and then I usually set them for 10-15% below current value with % depending on particular stock's volatility. I typically will only buy a stock if I think it has the potential to double. If it goes up 50% i set the stop at 10-15% and leave it. First time it goes down 10% I'm out. This has worked and not worked for me in the past as it's helped me sell some with some big gains but also left some money on the table at several times. Now the big problem though. What if it doesn't ever go up 50%. This means first I was wrong on the buy and second how do I now know when to sell. This is complicated by the fact that I usually buy in increments of 2-3 with second increment going in down 5% and last increment going in if down 10% from first buy. This helps me average into a stock as historically i tend to get in early but takes some real guts to keep buying on the way back down and the risk is your evaluation is wrong. I'm a true contrarian/bottom fisher in that sense and it does leave me open to risk. However, honestly my biggest loses over the years have all come not from being wrong on the initial buy but by letting them move up and then riding them all the way down and more. I've tried to prevent that as i have gained experience by following the rules above but my style does leave open considerable risk. I also do not short or use options at all to help mitigate risk. I'm just not comfortable with this as i have no experience in it and don't have the time for what to me are more complicated strategies. All comments are welcome. I invite some discussion on options etc.. to mitigate risk as i'd like to learn. joby