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Thanks tech/a, that makes sense. I suppose you would need a reasonably large position size, or a very strong gain for this to be worthwhile? (Otherwise you would be left with a very small parcel of stock).
Example.
buy the stock at $1
At 1.20 sell the initial stock cost outlay.
Keep the profit running.
The stock is now a fee trade.
to lose all the profit it would have to be delisted.( go broke).
I think if you want an honest intelligent view/opinion you need to provide all the info. I am certainly not prepared to say 'hold' or 'sell' without knowing which company you are referring to. There are a lot of quality stocks out there that have been oversold. Perhaps yours is one of them and you may just be sitting on a long-term winner.
in my view (Not advice just an observation)
I am certainly not prepared to say 'hold' or 'sell' without knowing which company you are referring to.
Example.
buy the stock at $1
At 1.20 sell the initial stock cost outlay.
Keep the profit running.
The stock is now a fee trade.
to lose all the profit it would have to be delisted.( go broke).
1. Realise the loss (which may mean selling near the bottom as the stock is now approaching a previous support level).
2. Average down (this seems like throwing good money after bad).
3. Put the shares in the bottom drawer (where bad stocks go to die).
Yes, but tech - this hardly works for someone that has very little capital.
Let's say someone has 5k to invest; they spread that over 5 stocks ... 1k per stock. A 20% gain is fairly substantial, and this would involve holding (at risk) for a fairly long period of time ... now, let's say it does eventually hit that 20% mark, after transaction fees ... that's only $130 worth of free-carried stock! Worthless; after further transaction fees, wouldn't even be worth selling.
Unfortunately, the other problem is that people with very little capital ... are more emotionally attached to the money they have. I've made this mistake myself in the past, sold out near-bottom for some hefty losses for fear of losing what I had. I believe if you don't have a lot of capital, you shouldn't be in the market ... period. Everyone says a portfolio should be diversified (across more sectors than stocks alone), should this not apply to even a very small portfolio?
Stop-losses (especially in the current market environment) can also be quite damaging to a small-holding; all that automatic selling, and re-buying can very quickly dissolve a small amount of money.
Good post and good points. But where's the answer? I would be even more confused after reading that and looking for a solution.
Panacea
Me personally I never place a trade without a stop loss. Now I do trade short term on FX 30min and 1hr time frames. But regardless of the time frame I always know my exit price. No matter how good you r at trading or how good your frame of mind or your analysis you can never you exactly what the market will do next. Due to that fact I put survival first. All my stops are worked out to a % of my account.
If I was long term I would also place stops, but they would be much wider then I use now to allow for natural movements. But like Tech has said u have to cut your losers and ride your winners!
Well, that's because there is no easy answer here. He / she has stated that they have very little capital, have made some mistakes, & realistically - there is nothing that can be done to "fix" the situation, only to prevent further losses I guess.
There is an answer in there though, if you read carefully. I did state that someone who has very little capital ... shouldn't be in the market (in my opinion). In the current market environment, unless you're really long-term, or really know what you're doing ... you shouldn't be in it.
No one can offer actual suggestions, only ideas - so, I shall pose this question to you Panacea - would you buy the stocks you currently hold right now? If you hadn't bought them already, and were looking at them right now, would you buy them? That is essentially what you're doing by holding them ... re-buying them.
If you're no longer confident in the company ... to the point where you would no longer comfortably invest in them, then you should really change something.
Hi guys. Thanks for the replies - there are some really constructive suggestions here. Obviously the issue i've raised is something many people have come across before.
I think i'll set a stop a couple of ticks below Fridays close. This will contain any further damage, while allowing me to look for a better exit if one presents itself.
>Apocalypto<, I agree with your take on small traders / investers being in the market. If i'm willing to cop the cost of brokerage as being part of the learning process, why not make the occasional small trade to learn the ropes? Who knows, I may be able to slowly grow my capital while learning 'hands on'.
Cheers.
An example. Based on investing multiples of $1000nioka,
Newbie question... what do you mean by trading stocks until they are "free-carried"?
Three days later and i'm sitting on a 35% paper loss.
I am not too worried about the financial cost as it's money I can afford to lose and I expect to take a few beatings along the way
what didn't u see coming?
I understand the concept of free trade but think its a rubbish one personally. Why
If you have $1 worth of stock and it raises to $1.20 why sell $1 worth...
My options would be..
(A) Sell the lot because you've realized the expected gains and the reason you brought are now fulfilled, or the reason for buying is no longer relevant.
(B) Keep them all as its got to $1.20 but your reason buying is still strong and you think its got some further growth up the sleeve.
If the stock went from $1 to $2 I would apply the above or (because of the massive gains) sell some to re-balance my portfolio.
Just my opinion.
This is my approach. Others have different ones.
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