Help!! My trailing stop loss triggered sale of AAPL

[novaman]

I need advice. My portfolio has done well this year, with about 1/3 of it in individual stock. I started to get more cautious so I put trailing stop losses set at 10% on the individual stocks. Well lo and behold, on thursday afternoon AAPL went into a temporary fast downturn and the stop loss triggered. But then AAPL rebounded very quickly over the rest of Thursday and Friday.

So should I remove these stop losses? I guess it did what its supposed to do, but I caused me to sell low, and I missed out on some rebound returns. It also triggered a very sizable taxable event for me that could have been postponed.

Finally, AAPL has been a GREAT stock for me, and looks like it will continue to be great in the future. Right now, based on my estimations it should sticker price at 215, and is trading in the 160's. Should I just buy it back? Or should I look for the next great deal.

[brewer12345]

As I remarked to Nords the other day, stop losses are the tool of the devil. Take stop losses off your account and consider the lesson learned.

[eridanus]

I had a stop-loss hit at the low of the day, and the volume at that price was exactly how many shares I owned. I've since stopped using them.

[kcowan]

I can go fishing for your stop loss orders simply by putting in low numbers at low prices especially late in the trading day when day traders are trying to liquidate their positions.

Regarding AAPL, we sold off 900 shares at $78 and it subsequently went to $85 and then retraced to $50. Stop losses cannot handle this kind of volatility. We still hold 300 shares. We are in buy and hold mode on them.

If I were you I would watch for the next dip and buy then with a limit order.

[tightasadrum]

I learned my lesson the hard way on stop loss tools. I had a large position in large oil company and got nervous that it would drop again, so I put in a 20% stop loss. Yep, it took a large dip in value one day, and I was out, all gone to cash. The bad news: it's up 50% since that unfortunate event in less than a year. I think traders use these triggers for their own gain somehow. I doubt I'll ever use a stop loss again. I'm still feeling the pain. The only good news is that I'm more diversified now.

If you still feel the stock is undervalued, why not buy it again. If you'd never owned the stock, would you look at it as a bargain at the current price? If so, buy it again and look at it as an expensive lesson in investing.

[73ss454]

I found out early on that using stop losses doesn't work. I began calling them stop gains and did away with them.

Remembering back in the late 90's watching the stock of Etrade. It was going nuts one day and shot up to over $126 so I put a stop loss in at $108. As I continued to watch the stock for a few more minutes I watched it drop and take me out at $108 and shoot back up to $126. That was the end of stop losses for me.

[Texas Proud]

Well.... I will be on the other side....

Stop losses do exactly as they are supposed to do... sell a stock at a price YOU have determined to be a price YOU want to get out of a stock if it is going down...

Would you be posting this if AAPL had gone down to $50? NOT... You would be saying 'look how smart I was in having my stop order in to lock in my gain'..


If you REALLY do not want to get out of a stock do not have stop loss orders.. if you REALLY think a stock is valued at $200 and selling at $160, then why have a stop loss anyhow And if you really do think so, they buy , buy, buy.....



As an aside... what about buying stock with a limit price? You say you want to buy company XYZ for $20 per share and it is selling for $25, but dips down to $20 and you get your stock and it goes back up... this to me is the same thing... you put down a price you were will to 'trade' and someone else traded their shares with you...

OR, you put in a limit sale order at a higher price and the stock shoots up for 10 minutes and you sell your stock and then it comes back down... this is just the opposite of the stop loss... are you now complaining that you no longer have the stock, probably not.... or heck, what if it kept rising and left your sales price in the dust... now you are complaining about selling to low....

All these are what you were willing to trade the stock... if you don't want it to sell, don't put in an order.

[73ss454]

I don't think there's sides here, it's what works for you.

If I'm not sure about a stock I'll just sell it and get out. I always use limit orders, I'm the one picking up the shares people are selling with the stop losses. (heh)

It's just like timing the market, sometimes they work and sometimes they don't.

[haha]

For the most part people use stop losses in "momentum stocks", where no sane individual really would want to own the stock- he just wants to lease it while it is going up, then dump it onto someone else when it stops.

This is called trading, and trading of the most bald-faced kind. If you do it, master it (to whatever extent that is possible). I would think that an internet board is not really a resource for this activity.

Apple is not a value stock. There have been times when it was. I would wait for value, then after considerable investigation buy value with commitment.

Only sell if your commitment is challenged by something other than market movement, or if you believe it has reached full value or nearly so.

Ha

[fmhealth]

Nova, this has happened to me numerous times. What I simply do is reevaluate the situation at that point in time. If I still believe that particular stock offers value, I'll rebuy it w/o a second thought.

I use s/l orders on options almost every day. I believe the game revolves around controlling risk BEFORE you enter a trade. Which is a strategy that while costing me some material upside moves has saved me countless times on the downside.

My feeling, everyone involved in the transaction has to win sometimes. The buyer, seller & MM. Otherwise eventually the market simply vaporizes over time. I sell options. As you know they expire worthless, to the buyer 80% of the time. But that 20% lets the buyers & MMs keep the game moving.

So my long answer to your short question is align your strategies BEFORE initiating the trade & then fine-tune if necessary. Hope this helps.

[brewer12345]

Quote:

Originally Posted by haha For the most part people use stop losses in "momentum stocks", where no sane individual really would want to own the stock- he just wants to lease it while it is going up, then dump it onto someone else when it stops. This is called trading, and trading of the most bald-faced kind. If you do it, master it (to whatever extent that is possible). I would think that an internet board is not really a resource for this activity. Apple is not a value stock. There have been times when it was. I would wait for value, then after considerable investigation buy value with commitment. Only sell if your commitment is challenged by something other than market movement, or if you believe it has reached full value or nearly so. Ha

Grasshopper would do well to consider the wisdom of the worshipful master.


What is the sound of a loss being stopped?

[73ss454]

"kurplunk"

[ziggy29]

Stock prices seem to have an uncanny knack for just barely finding your stop, getting the trade triggered, and then bouncing back.

[FinanceDude]

Quote:

Originally Posted by brewer12345 As I remarked to Nords the other day, stop losses are the tool of the devil. Take stop losses off your account and consider the lesson learned.

Maybe there's a study that shows how well or horrible they work, but I have not seen it........

I used them with success in 2000-2002,but have not used them since...........

[FinanceDude]

Quote:

Originally Posted by ziggy29 Stock prices seem to have an uncanny knack for just barely finding your stop, getting the trade triggered, and then bouncing back.

Pretty much.........

[FinanceDude]

Quote:

Originally Posted by haha For the most part people use stop losses in "momentum stocks", where no sane individual really would want to own the stock- he just wants to lease it while it is going up, then dump it onto someone else when it stops.

Lucent and CMGI come to mind........

Quote:

Only sell if your commitment is challenged by something other than market movement, or if you believe it has reached full value or nearly so.

EVERYONE has a BUY discipline, many LESS have a SELL discipline.........

[ERD50]

Not too many fans of stop limits here, is there? I don't use them either.

You could consider buying a PUT on a volatile stock. It's insurance, you will be throwing the money away if the stock never drops. But I've done it a few times when I wanted to hold through a volatile period. If I think the stock has a good chance of rising after that time, I don't want to sell it, but I don't want to suffer too much if it does drop.

It's more an emotional thing for me - I can 'sleep' owning that stock if I have the put on it, else I should sell the stock - but then I would miss any rise.

Just another POV. - ERD50

[clifp]

I use limit buy orders for thinly traded issues, but gave up on stop loss order, because I think the name stop gain is very apropos.

If you have your heart set for a particular price for a particular stock, I think options are the way to go. Otherwise just use market order for heavily trade stocks.

Especially in this richly valued market I routinely "buy" stocks by writing a put at price I think is good. On rare ocassions when I have a high flyer like Apple I'll buy a put.

Although in this situation I'd be inclined to use a collar for instance you could buy 150 put while writing a 200 Jan Call, it would cost $1.65/share+commission but you'd be guarrantee to make a profit on your Apple stock would you be unhappy selling Apple for $200 when is only going for $100 back in April?

[kcowan]

I considered writing covered calls on AAPL but never got around to it. Was in the money by a substantial margin by the time of the Call. I guess being happy is a relative term.