How & when to put STOP LOSS?

[rsingh6675]

I have a question about stop loss, since I have lost good amount of fortune and am waiting to get even!!! An example---I bot MON @ $113 in Dec 2007. It went up to ~$142 and I didn't sell (LONG TERM BUY!!). Now this thing is around $72. So my question is when should I have put stop loss, @$142, @113 or @$100?
Or should I get out of it now?
This question also applies to all my mutual funds, some of which are down to >50% (Example DODGX down from $162 (my buying price) to current price of $73.57). Very frustrating for someone who wants to retire.
Any ideas which are some GOOD CONSERVATIVE RETIREMENT FUNDS where you don't loose your shirt. I used to think DODGX was a good fund, but never thought, I will loose 55% of my retirement money!!!!

 

[al_bundy]

depends on what your time horizon is

i've read trading blogs where they buy a stock and put an automatic price that might kick off the same day

 

[Animorph]

I never used a stop loss. It's an absolutely sure way of selling low. I try to sell on an up day and buy on a down day at the very least.

As far as I'm concerned, there is no way to know that the stock/fund won't recover just after your sell kicks in. You may sell and miss gains, with statistically slightly better probability (stocks/funds go up on average) than selling and missing a significant loss. Sell if you have reached a target or need to rebalance.

If you're investing long term, I'd forget the stop loss.

 

[ERD50]

I never used a stop loss. It's an absolutely sure way of selling low. I try to sell on an up day and buy on a down day at the very least.

As far as I'm concerned, there is no way to know that the stock/fund won't recover just after your sell kicks in. You may sell and miss gains, with statistically slightly better probability (stocks/funds go up on average) than selling and missing a significant loss. Sell if you have reached a target or need to rebalance.

If you're investing long term, I'd forget the stop loss.

That is my take on it also. I'd love to see strong evidence to the contrary, but I won't hold my breath.

There are a couple occasions where I wanted to hold a stock a bit longer (LT cap gains), or an earnings call or other event was coming up that might be bad, but I hoped good. In those cases I might buy a put to get me over the rough stretch. Mostly just helps me sleep, I doubt it meant much financially.

-ERD50

 

[jameson71]

From my understanding stop loss is normally used by day traders doing technical analysis, not so much by buy and holders investing for the long term.

 

[Lsbcal]

I have a question about stop loss, since I have lost good amount of fortune and am waiting to get even!!! An example---I bot MON @ $113 in Dec 2007. It went up to ~$142 and I didn't sell (LONG TERM BUY!!). Now this thing is around $72. So my question is when should I have put stop loss, @$142, @113 or @$100?
Or should I get out of it now?
This question also applies to all my mutual funds, some of which are down to >50% (Example DODGX down from $162 (my buying price) to current price of $73.57). Very frustrating for someone who wants to retire.
Any ideas which are some GOOD CONSERVATIVE RETIREMENT FUNDS where you don't loose your shirt. I used to think DODGX was a good fund, but never thought, I will loose 55% of my retirement money!!!!

This used to be called get-even-and-get-out. My advice would be to decide if you really want to manage your money yourself. If not talk with maybe Vanguard or Fidelity about a decent stock/bond combo in low expense ratio funds that will help you to meet your goals. Maybe one of those target retirement funds. Boring but it might just work. Then look at how to exit your current positions.

There is no magic in stop-losses and I've never used them.

 

[al_bundy]

From my understanding stop loss is normally used by day traders doing technical analysis, not so much by buy and holders investing for the long term.

anyone doing short term trading of a few days to a few weeks. theory is that if you control your losses you will make more money in the end

 

[ERD50]

anyone doing short term trading of a few days to a few weeks. theory is that if you control your losses you will make more money in the end

Are you aware of any data that backs up the theory in practice?

While you might be "controlling your losses", you are probably going to take many more small losses as result (and miss out on some gains if that stock jumps back up to positive). I'm very, very skeptical that the strategy helps over the long run.

-ERD50

 

[ziggy29]

I don't think anyone can say *when* to put in a stop loss except in hindsight, where we'd all chime in with "September 2007"...

 

[FinanceDude]

Couple things about stop losses:

1)If the stock is dropping fast you can get stung on the stop loss. If you put a stop at $50 on a stock, the execution happens at the NEXT price at or LOWER than the stop. So, if a big institutional trader throws a big sell in right before you do, you might get stopped at $49 or $48 or even lower.

2)Stop losses are tough for investors to agree to because they involve having a SELL discipline, which most investors don't really have, they only have a BUY discipline.

3)You can set up a stop to only execute at the END of the trading day, rather than whenever. They have helped and hurt, I would say overall it was a dead wash.

4)They are over-rated as a "tool"........

 

[ziggy29]

1)If the stock is dropping fast you can get stung on the stop loss. If you put a stop at $50 on a stock, the execution happens at the NEXT price at or LOWER than the stop. So, if a big institutional trader throws a big sell in right before you do, you might get stopped at $49 or $48 or even lower.

Or worse in some cases: You own a stock at $60 and put in a stop at $55.

The market closes.

Something VERY negative to the company is announced after the close.

When the market opens again, the stock opens at $20.

Your stop kicks in and you probably just sold it for $20.

 

[FinanceDude]

Or worse in some cases: You own a stock at $60 and put in a stop at $55.

The market closes.

Something VERY negative to the company is announced after the close.

When the market opens again, the stock opens at $20.

Your stop kicks in and you probably just sold it for $20.

I was TRYING to mute the blow a little for folks on here. However, "reality ziggy" strikes again.........

Bottom line, keeping on top of stops takes a lot of energy and stress. I don't do it as an FA, and most small investors shouldn't either. Buy what you want, and sell it when you want, and K.I.S.S.