It doesn't matter that you're wrong, only how long you stay wrong!!

[tech/a]

Nick Radge was the first I know to coin the phrase.
But I've seen it time and again over 17 yrs.
People get it so so right only to eventually get it so so wrong.

PEN
Is the stock of discussion currently.
Some got it very right from 3.6 c to 16c from memory only to see it fall a whopping 66% when there was clear signals that this stock had run it's course.
Now as CL has pointed out you need a 130% price rise just to be square again.

BUT
Some have added more on the way down convinced that cheap today will be cheap tomorrow. So far it hasn't been and isn't showing any reason for it to be the case in the near future.
Frankly I think with every stock there is ample time for those interested enough to educate themselves in the basic skills of recognizing Supply and Demand through Volume and Range Analysis,to get on board any worthwhile positive move.
I managed 30% myself in a couple of days on the very same stock.
So far our longterm investors are 100% up in a few years.Personally I'll take the 30 % in 2 days anytime.

BOGGO
Has pointed out opportunity cost whick is a biggy.
There could and should be many 30 % s in a few days in THIS MARKET.

There are times to hold and times to fold and this Market isn't indicating longterm long trending anytime soon.

 

[mr. jeff]

What a great thread name.

Are you trying to make this a confession booth?

I confess that I have become a bad loser this year after such a dream run last year and this thread should have been created in February. A good winner is a good loser. CUT LOSERS FAST. I have become lazy - I have watched 60% gains in 2 weeks dissappear into losses, and countless 30% gains go down as well.

I have bought stocks because they are "promising" and "very cheap". Writing this makes me laugh in my own face. Promising and cheap?! I have no income except trading and I am using my account on promises and cheapness!

I CAN NOT MAKE MONEY FROM A GOOD STORY! The only people that make money from good stories are the PR people who write them and add carefully cropped glossy pictures.

A reminder to others here who contribute - buy stocks that are winners, don't get stuck in a serious downtrend that makes you feel locked in -take it off the table quickly and move on to other opportunities.

 

[Wysiwyg]

How long is long? Most trades are "wrong" from the outset (spread) unless one gets a flying start. "Cut losses short" is purely a judgement thing and only hard stop losses will do this every time. Unfortunately or fortunately, the "cut losses short" scenario leaves one in two positions afterwards...

1) the trade continues down (the exit was good)
2) the trade swings up after exit (the exit was too soon - additional brokerage costs from more trading)

I think the trading time frame for each trader is what determines "how long they stay wrong". This is quite varied. I don't mind being wrong because I can't pick the turning points exactly and hindsight aint my teacher.

 

[Boggo]

I confess that I have become a bad loser this year after such a dream run last year and this thread should have been created in February. A good winner is a good loser. CUT LOSERS FAST. I have become lazy - I have watched 60% gains in 2 weeks dissappear into losses, and countless 30% gains go down as well.

Its a different market now mr jeff, it requires more of a hunter instinct.
You have identified that, the problem is do you put in more time and effort or just go to cash and stand on the sidelines.
Getting into any stock is no different really, its the knowing when to get out is the bit everyone gets wrong especially at the moment.

1) the trade continues down (the exit was good)
2) the trade swings up after exit (the exit was too soon - additional brokerage costs from more trading)

Don't look back at it. If it turned against you and you got out at the capital protection point that you determined when you made the decision to get in then you have followed the plan and you have only lost what you were willing to risk.
There is only one exit.

Are you planning your exit strategy after it has turned against you Wysiwyg ?

 

[matty77]

Whats more important, knowing when to sell? or knowing when to buy?

I think knowing when to sell is the hardest thing to get right but certainly the most important.

 

[Wysiwyg]

Are you planning your exit strategy after it has turned against you ?

Thanks Boggo.
Mainly trading company value and potential value so time is secondary until these values decline or are realised. The daily fluctuations and market 'sentiment' I can ignore.

 

[Country Lad]

CL must have had his 80th birthday by now !

Thanks Tech, I think. No, not quite, you are about a decade and a half out.

mr jeff, I doubt Tech intended this as a confessional, just a continuation of the point Boggo and I were making about the folly of holding stocks which are in obvious downtrend.

Using the PEN example, it has been quite obviously in downtrend since 22 Feb. A response to this may be that it is easily seen in hindsight, but regardless of how we look at it, it was patently obvious that from 11 March downward was the only direction.
As I said in the other thread, I have been in this shares trading/investment game for about 30 years and over time have associated with a large number of very experienced traders/investors. Not one of us will hold a share in obvious downtrend unless it offers a significant return on the investment through dividends. Not one of us would hold a speculative share in downtrend because in our minds there is simply no valid reason to do so.

The Downside of Holding on to Speculative Shares

There is always a reason a share falls in value whether you are aware of that reason or not. Once out of favour, a share may well take a long time to come back in favour if ever.

A value drop of 10% means that it will need a 11% increase to break even, which isn’t so bad. However, a 20% drop needs a 25% rise, a 50% drop needs a 100% and in the case of PEN now, it needs about a 140% increase. Many of the specs will not recover at all.

Holding on therefore ties up funds, possibly forever, which could be used to buy other profitable stocks. The justification in people’s mind in holding is that it has become a long term investment. This is rationalising a mistake, no spekky can be considered an investment.

In most cases the spekky will not recover and at some point it will become obvious that it is a loser and it is sold at a much greater loss than would be the case when the downtrend was first identified.

Why Hold on to a Loser

It should be made clear that a speculative share in downtrend is a loser. It should no longer be seen as an opportunity, it is losing value so it is a loser.

Over the years I have been involved in trading groups where many in the group were new to trading or inexperienced. I have also run trading information sessions for new or inexperienced traders for my broker.

There is absolutely no doubt that the experienced did not hold shares in downtrend. The inexperienced had 5 main reasons for not selling:

1. Selling at a loss was very difficult, selling at a profit was easy;
2. Selling would be admitting a mistake
3. Fell in love with the company/share and it can do no wrong even when the price is plummeting
4. People who appeared more experienced were saying to hold on – it will come back
5. Some members on a forum were posting positive information

Not Holding on to a Loser

The reasons for not holding on to losers given by the experienced traders

1. Opportunity to use the funds to buy a winner
2. Once out of favour, more often than not, it is likely the market sentiment to that share will remain negative for quite some time
3. If it is felt it is a good company there will be an opportunity to buy back more for the same outlay

For people who have difficulty in selling at a loss, I am reminded of a saying by one of the most successful traders I know

“If it feels like a difficult decision, it is most likely the correct one”.

Some people may have noticed that I have been a member of this forum since 2005 but my first post was a couple of months ago. Like many other forums, there are quite a few vocal members here giving bad advice and covertly ramping particular shares by posting all sort of links and quotes. I just can’t be bothered arguing so I don’t generally visit forums. I tend to stick with our trading groups of mainly experienced traders without the nonsense.

Cheers
Country Lad

 

[Country Lad]

Whats more important, knowing when to sell? or knowing when to buy?

I think knowing when to sell is the hardest thing to get right but certainly the most important.

Absolutely.

 

[Country Lad]

Thanks Boggo. ............and market 'sentiment' I can ignore.

I never ignore market sentiment, but then it depends on how you define market sentiment. The daily ups and downs of the market and of individual shares are not necessarily relevant. It is how the market reacts to news broadly, how the shares of various sectors are moving, the reaction to outside influences and many other factors.

Cheers
Country Lad

 

[Boggo]

Country Lad, your post (#7) above has to be a candidate for the post of the year.

No agenda, no ramping, the facts just how they are, it's as simple as that.

Well done CL

Boggo

 

[Julia]

Country Lad, your post (#7) above has to be a candidate for the post of the year.

No agenda, no ramping, the facts just how they are, it's as simple as that.

Well done CL

Boggo

I agree. Great post, CL.

As is your own comment, Boggo:

Don't look back at it. If it turned against you and you got out at the capital protection point that you determined when you made the decision to get in then you have followed the plan and you have only lost what you were willing to risk.
There is only one exit.

 

[So_Cynical]

On the flip side "It doesn't matter that you're wrong, only how long you stay wrong!!" only holds true if the SP slide continues or doesn't rally within your investment time frame...if the stock bottoms and starts running up then selling at the worst possible time would be a mistake for an investor with a longer term view.

For example

I have an open position in APN and recently took a small average down and was encouraged by a recent change in substantial holder announcement by Orbis Group...Orbis now holds over 13% of APN and have been holding for about the same length of time as i have (coincidence) and have continued to buy and lift there stake in APN in spite of the stock experiencing a substantial down trend.

http://www.asx.com.au/asxpdf/20110615/pdf/41z7f54nzfb3p3.pdf

Orbis are very experienced contrarian, value investors with a longer term view and over 2 billion under management...these guys have been very successful following their strategy and continue to buy APN despite the 12 months+ down trend....so perhaps "It doesn't matter that you're wrong, only how long you stay wrong!!" only really applies if you are wrong within your investment time frame.

Personally i don't look at charts covering time frames less than 6 months...and for the record wouldn't touch PEN with a barge pole at any price.
~

 

[Julia]

Just a general comment in regard to protecting capital.

When the GFC happened the media was filled with 'experts' all saying "don't worry, it will all be just fine. Markets always come back" etc etc.
This almost entirely from parties with a clear stake in people holding their "Growth" managed funds, on the basis that if they advised clients to go to cash, their own income streams would be forfeited.

So many naive investors followed what they considered - reasonably enough - to be expert advice and lost a bundle.

I wonder how many of these investors have since decided to educate themselves in order not to be ever again in such a vulnerable position. My guess is, very few.

 

[Boggo]

On the flip side "It doesn't matter that you're wrong, only how long you stay wrong!!" only holds true if the SP slide continues or doesn't rally within your investment time frame...if the stock bottoms and starts running up then selling at the worst possible time would be a mistake for an investor with a longer term view.

That statement after the one below on 19th May !!
Have you sold out of PTM or are you still holding, it closed on $4.03 today.

I brought into PTM today at $4.73 pretty much a nine month low, factoring the dividend forward i reckon a gross yield of around 5.5% is quite probable...Platinum is a star fund manager in an industry dominated by mediocrity and ultra conservatism.

 

[Boggo]

I wonder how many of these investors have since decided to educate themselves in order not to be ever again in such a vulnerable position. My guess is, very few.

From the numerous chats you see around the old campfire on here they are unlikely to become extinct Julia.
The more the market falls the more of them appear and the more defensive they get, tough little critters

 

[bathuu]

1) the trade continues down (the exit was good)
2) the trade swings up after exit (the exit was too soon - additional brokerage costs from more trading)

I would never regret for losing more opportunity for profits than incurring more losses. Safety comes first to greed

 

[bathuu]

Thanks Tech, I think. No, not quite, you are about a decade and a half out.

mr jeff, I doubt Tech intended this as a confessional, just a continuation of the point Boggo and I were making about the folly of holding stocks which are in obvious downtrend.

Using the PEN example, it has been quite obviously in downtrend since 22 Feb. A response to this may be that it is easily seen in hindsight, but regardless of how we look at it, it was patently obvious that from 11 March downward was the only direction.
As I said in the other thread, I have been in this shares trading/investment game for about 30 years and over time have associated with a large number of very experienced traders/investors. Not one of us will hold a share in obvious downtrend unless it offers a significant return on the investment through dividends. Not one of us would hold a speculative share in downtrend because in our minds there is simply no valid reason to do so.

The Downside of Holding on to Speculative Shares

There is always a reason a share falls in value whether you are aware of that reason or not. Once out of favour, a share may well take a long time to come back in favour if ever.

A value drop of 10% means that it will need a 11% increase to break even, which isn’t so bad. However, a 20% drop needs a 25% rise, a 50% drop needs a 100% and in the case of PEN now, it needs about a 140% increase. Many of the specs will not recover at all.

Holding on therefore ties up funds, possibly forever, which could be used to buy other profitable stocks. The justification in people’s mind in holding is that it has become a long term investment. This is rationalising a mistake, no spekky can be considered an investment.

In most cases the spekky will not recover and at some point it will become obvious that it is a loser and it is sold at a much greater loss than would be the case when the downtrend was first identified.

Why Hold on to a Loser

It should be made clear that a speculative share in downtrend is a loser. It should no longer be seen as an opportunity, it is losing value so it is a loser.

Over the years I have been involved in trading groups where many in the group were new to trading or inexperienced. I have also run trading information sessions for new or inexperienced traders for my broker.

There is absolutely no doubt that the experienced did not hold shares in downtrend. The inexperienced had 5 main reasons for not selling:

1. Selling at a loss was very difficult, selling at a profit was easy;
2. Selling would be admitting a mistake
3. Fell in love with the company/share and it can do no wrong even when the price is plummeting
4. People who appeared more experienced were saying to hold on – it will come back
5. Some members on a forum were posting positive information

Not Holding on to a Loser

The reasons for not holding on to losers given by the experienced traders

1. Opportunity to use the funds to buy a winner
2. Once out of favour, more often than not, it is likely the market sentiment to that share will remain negative for quite some time
3. If it is felt it is a good company there will be an opportunity to buy back more for the same outlay

For people who have difficulty in selling at a loss, I am reminded of a saying by one of the most successful traders I know

“If it feels like a difficult decision, it is most likely the correct one”.

Some people may have noticed that I have been a member of this forum since 2005 but my first post was a couple of months ago. Like many other forums, there are quite a few vocal members here giving bad advice and covertly ramping particular shares by posting all sort of links and quotes. I just can’t be bothered arguing so I don’t generally visit forums. I tend to stick with our trading groups of mainly experienced traders without the nonsense.

Cheers
Country Lad

The one of very few best posts I have ever read in this forum as a beginner for the share market.

 

[So_Cynical]

Quote Originally Posted by So_Cynical (1st-August-2010)
I brought into PTM today at $4.73 pretty much a nine month low, factoring the dividend forward i reckon a gross yield of around 5.5% is quite probable...Platinum is a star fund manager in an industry dominated by mediocrity and ultra conservatism.

That statement after the one below on 19th May !!
Have you sold out of PTM or are you still holding, it closed on $4.03 today.

Still holding and have taken a small average down @ 4.39 and will continue to hold, fundamentally little has changed for PTM and i may well take another small average down if it slips under $4....i did have opportunity's to exit my original PTM position with around 15% profit (from memory) however decided to "let my winners run" turned out to be a bad move.

One of my favourite sayings is "don't buy a stock unless your prepared to buy more if the trade goes against you" this has been a very successful strategy for me over the last 4 years and i will continue to peruse it with vigour.

---------------

Just for the record a quick look at Stator tells me that since i first entered my PTM trade (1st-August-2010) i have closed 6 older trades for 4 winners, opened 18 new positions and have closed 14 of them as winning trades and continue to hold the other 4 losers...a winning strategy is more than just 1 trade.

 

[Boggo]

One of my favourite sayings is "don't buy a stock unless your prepared to buy more if the trade goes against you" this has been a very successful strategy for me over the last 4 years and i will continue to peruse it with vigour.

OK, cannot get my head around that concept though

 

[Country Lad]

One of my pet hates is the term "averaging down" which I consider as a nice way to say "I stuffed up by not selling and I am now compounding the mistake".

That should bring a few out of the woodwork.

Cheers
Country Lad