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Post by enigma on Aug 28, 2016 21:18:18 GMT -5
Then that should be a valid approach for any stock that is rebounding, whether you own it or not. Is that true? Buy a rebounding stock and sell a little at a time on the way up? This all depends upon the investor's confidence in what will happen. Here's a real life example. A few years ago, HIMX was selling at $6/share. The fundamentals suggested that the stock ought to be selling at $8 or above. I bought some shares, and shortly thereafter the price fell to $5. I then bought more shares because it seemed even more undervalued than before. Later, some news came out that Google Glass was going to use HIMX in their VR products and that Google had bought shares in the company. The price began to climb. When the price rose to $8, I began to sell shares in order to lock in some gains. At $10 I sold more shares. The price kept rising, and I sold out at $12 because the fundamentals no longer justified the price in my mind. I think it went all the way to $14/share before collapsing. When it fell back to $7, I began buying again. I bought more and more shares as it fell, and when it later rebounded, I gradually sold out again. I've done this over and over again for several years. I sold shares at $9.94 on Friday, and I have both buy and sell limit orders in place. If it goes higher, then I'll sell out, and if it falls back, I'll buy shares back. By contrast, some stocks that are seemingly undervalued, go down and stay down. The investor's task is to study and try to understand why particular stocks are undervalued and why they may eventually rise to a correct valuation. Sometimes it's much harder to know when to sell a stock than when to buy a stock. I've seen stocks go up 500% and then fall all the way back down. By selling a portion on one's position on the way up, gains are locked in. It's impossible to predict exactly where the top or bottom of a stock is going to be, so too much greed can be dangerous. Most of the time it makes more sense to lock in a certain amount of gains rather than going for the maximum potential gains. Buy and hold investing makes more sense when buying blue chip stocks with a huge moat and a great future. Hi-tech stocks are way more volatile than blue chips, and new innovations and competition can change the landscape precipitously. Better to take good gains when they're available because they can easily disappear. The strategy that you call locking in gains might more appropriately be called hedging your bet. I'm not suggesting it isn't a wise thing to do, only that it is a conservative move that limits both you losses and your gains. |
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Post by enigma on Aug 28, 2016 21:23:38 GMT -5
The rules of the game are clear. What I'm suggesting is that it's a fool's game. Would it be advisable for me to invest in this hypothetical volatile stock and play that buy/sell game as an investment strategy, never having owned it before or experienced the loss? If not, why would you do it? So let's say you sell at a local peak, and it keeps going up from there. Well, sucks even worse to be you but not so bad if you'd sold out 5% lower. If it goes back down, you're taking a risk re-buying, but like I said, you're (grudgingly) more familiar with the story at that point, and you're in a similar boat to peeps who are taking advantage of what looks like an opportunity because of the crater. Once your loss is pared to a (subjectively) acceptable level you might not re-buy on the way back down. An investor who reports that they're more willing to do this with VW than Netflix is expressing a preference that may or may not prove itself to be wise, as it is gambling, but with no risk there is no possibility of reward.  That point is super duper crystal clear.  Lemme just ask point blank; How much of a role should an investors emotions play in his investment strategy? (ideally) |
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Post by enigma on Aug 28, 2016 21:28:10 GMT -5
The rules of the game are clear. What I'm suggesting is that it's a fool's game. Would it be advisable for me to invest in this hypothetical volatile stock and play that buy/sell game as an investment strategy, never having owned it before or experienced the loss? If not, why would you do it? No, you would not invest in such a stock if you didn't already own it. You do this only because you already own it, and you're stuck with it, and you do it with only a portion or your position at a time to prevent getting totally left behind in the off chance that the stock significantly recovers. It's only a fool's game if the underlying assets of the company are so bad that the trade is a pure gamble. Most of the time it's possible to see enough of the moving parts of the puzzle to make an educated guess about what will probably happen. If the strategy itself is not viable (selling at peaks, buying at valleys) then why is it viable for the one owning the stock? Either it's a way to profit or a way to lose. Which is it? |
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Post by laughter on Aug 28, 2016 21:40:49 GMT -5
Oh, one point that might not be so clear is that you want out anyway. So let's say you sell at a local peak, and it keeps going up from there. Well, sucks even worse to be you but not so bad if you'd sold out 5% lower. If it goes back down, you're taking a risk re-buying, but like I said, you're (grudgingly) more familiar with the story at that point, and you're in a similar boat to peeps who are taking advantage of what looks like an opportunity because of the crater. Once your loss is pared to a (subjectively) acceptable level you might not re-buy on the way back down. An investor who reports that they're more willing to do this with VW than Netflix is expressing a preference that may or may not prove itself to be wise, as it is gambling, but with no risk there is no possibility of reward. Correct. The investor usually has a good feel for the history of the stock's performance and an understanding of what's going on, or what may have changed, that was not apparent when first buying the stock. One huge misconception about the market is that "the big guys understand more than the little guys." Frequently, the opposite is true. Wall Street traders are like a herd that stampedes in both directions, and little guys often have a big advantage because buying small blocks of shares will not move the market. Most mutual funds cannot buy a stock worth less than $5/share, and they will almost never buy a stock that is not followed by analysts. An intelligent small investor can often far outperform big investors who exhibit "group-think." The professional players in the financial markets have never been monolithic and the picture is one that goes through cycles of ever growing complexity. Historically, you had the market makers, the proprietary traders and the fund managers, and the fixed income markets were made up almost exclusively of deep pockets with very little public visibility. There's been multiplication of these roles by the blurring of all of those old lines, new exchanges, the steady rise in the relative importance of markets other than the U.S., among other factors. But the commonalities among all of these different professionals is that the traders are for the most part wagering other peoples money and are highly leveraged. This leads them to take positions with heavy risk loads that they're under massive pressure to make perform, and, if the organizations behind them are functioning properly, they've got a risk management team breathing down their necks always calling for pulling the plug on a stop-loss.  |
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Post by laughter on Aug 28, 2016 21:58:54 GMT -5
Oh, one point that might not be so clear is that you want out anyway. So let's say you sell at a local peak, and it keeps going up from there. Well, sucks even worse to be you but not so bad if you'd sold out 5% lower. If it goes back down, you're taking a risk re-buying, but like I said, you're (grudgingly) more familiar with the story at that point, and you're in a similar boat to peeps who are taking advantage of what looks like an opportunity because of the crater. Once your loss is pared to a (subjectively) acceptable level you might not re-buy on the way back down. An investor who reports that they're more willing to do this with VW than Netflix is expressing a preference that may or may not prove itself to be wise, as it is gambling, but with no risk there is no possibility of reward. That point is super duper crystal clear. Lemme just ask point blank; How much of a role should an investors emotions play in his investment strategy? (ideally) Generally speaking the less emotion involved in the choice of what to invest in the better, but timing is a different story, and anyone who tells you not to time the market simply doesn't understand it. That decision also has some rational factors, but it's not a simple notion. For example, the aforementioned 25% on the S&P is when you'd start averaging in. If you're looking to call an inflection point in a market (overall or a specific stock), you look to volume -- which can work either way, you're looking for extreme light or extreme heavy, but the inflection might not happen. You also look for widening "spreads". That's the difference between what the market-makers are willing to buy and sell at. When there's less liquidity in a market, there's more uncertainty in it's direction. There's a bit of a cat and mouse game that goes on when the tides are ready to turn and lots of time the market will move counter-intuitively in the short and mid term which is referred to as "buy the rumor, sell the news". Ultimately, pulling the trigger on a any given buy or a sell is only ever 100% rational if you've got inside information. You have to remember that the players are trying to anticipate outcomes across various time-horizons, and the problem presents, how do you make rational decisions about an imagined future? |
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Post by enigma on Aug 28, 2016 22:23:54 GMT -5
That point is super duper crystal clear. Lemme just ask point blank; How much of a role should an investors emotions play in his investment strategy? (ideally) Generally speaking the less emotion involved in the choice of what to invest in the better, but timing is a different story, and anyone who tells you not to time the market simply doesn't understand it. That decision also has some rational factors, but it's not a simple notion. For example, the aforementioned 25% on the S&P is when you'd start averaging in. If you're looking to call an inflection point in a market (overall or a specific stock), you look to volume -- which can work either way, you're looking for extreme light or extreme heavy, but the inflection might not happen. You also look for widening "spreads". That's the difference between what the market-makers are willing to buy and sell at. When there's less liquidity in a market, there's more uncertainty in it's direction. There's a bit of a cat and mouse game that goes on when the tides are ready to turn and lots of time the market will move counter-intuitively in the short and mid term which is referred to as "buy the rumor, sell the news". Ultimately, pulling the trigger on a any given buy or a sell is only ever 100% rational if you've got inside information. You have to remember that the players are trying to anticipate outcomes across various time-horizons, and the problem presents, how do you make rational decisions about an imagined future? I'm not understanding why an investor should employ his emotions in making timing decisions. I also see no problem with trying to make rational decisions about a hypothetical. Yous guys have a lot of investment info you want to share, but my investing days are over. My focus of inquiry is very narrow here. |
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Post by laughter on Aug 28, 2016 22:34:35 GMT -5
Generally speaking the less emotion involved in the choice of what to invest in the better, but timing is a different story, and anyone who tells you not to time the market simply doesn't understand it. That decision also has some rational factors, but it's not a simple notion. For example, the aforementioned 25% on the S&P is when you'd start averaging in. If you're looking to call an inflection point in a market (overall or a specific stock), you look to volume -- which can work either way, you're looking for extreme light or extreme heavy, but the inflection might not happen. You also look for widening "spreads". That's the difference between what the market-makers are willing to buy and sell at. When there's less liquidity in a market, there's more uncertainty in it's direction. There's a bit of a cat and mouse game that goes on when the tides are ready to turn and lots of time the market will move counter-intuitively in the short and mid term which is referred to as "buy the rumor, sell the news". Ultimately, pulling the trigger on a any given buy or a sell is only ever 100% rational if you've got inside information. You have to remember that the players are trying to anticipate outcomes across various time-horizons, and the problem presents, how do you make rational decisions about an imagined future? I'm not understanding why an investor should employ his emotions in making timing decisions. I also see no problem with trying to make rational decisions about a hypothetical. Yous guys have a lot of investment info you want to share, but my investing days are over. My focus of inquiry is very narrow here. , and I gave you a few examples of those: numbers on volumes and liquidity. But ultimately, unless you know what's going to happen with a certainty, there's some other element that goes into any given trade. Now, you can look at this from the other direction. Market "panics" are always triggered by multiple participants suddenly moving big volume to limit their risk. These aren't naive individuals. Are their decisions to dump cold blooded or driven by fear? You could actually characterize it either way as what's going on in most cases isn't limited to the mind of a single individual. |
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Post by Deleted on Aug 29, 2016 4:06:25 GMT -5
well I hope you didn't panic sell out of fear, Citrix is back up to $88.. all you needed was a little patience.. Hey somebody has to lose their shirt so that the rest of us can make a profit. it will all equal out in the long run but in the short term you can expect a lot of volatility |
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Post by zendancer on Aug 29, 2016 6:02:27 GMT -5
This all depends upon the investor's confidence in what will happen. Here's a real life example. A few years ago, HIMX was selling at $6/share. The fundamentals suggested that the stock ought to be selling at $8 or above. I bought some shares, and shortly thereafter the price fell to $5. I then bought more shares because it seemed even more undervalued than before. Later, some news came out that Google Glass was going to use HIMX in their VR products and that Google had bought shares in the company. The price began to climb. When the price rose to $8, I began to sell shares in order to lock in some gains. At $10 I sold more shares. The price kept rising, and I sold out at $12 because the fundamentals no longer justified the price in my mind. I think it went all the way to $14/share before collapsing. When it fell back to $7, I began buying again. I bought more and more shares as it fell, and when it later rebounded, I gradually sold out again. I've done this over and over again for several years. I sold shares at $9.94 on Friday, and I have both buy and sell limit orders in place. If it goes higher, then I'll sell out, and if it falls back, I'll buy shares back. By contrast, some stocks that are seemingly undervalued, go down and stay down. The investor's task is to study and try to understand why particular stocks are undervalued and why they may eventually rise to a correct valuation. Sometimes it's much harder to know when to sell a stock than when to buy a stock. I've seen stocks go up 500% and then fall all the way back down. By selling a portion on one's position on the way up, gains are locked in. It's impossible to predict exactly where the top or bottom of a stock is going to be, so too much greed can be dangerous. Most of the time it makes more sense to lock in a certain amount of gains rather than going for the maximum potential gains. Buy and hold investing makes more sense when buying blue chip stocks with a huge moat and a great future. Hi-tech stocks are way more volatile than blue chips, and new innovations and competition can change the landscape precipitously. Better to take good gains when they're available because they can easily disappear. The strategy that you call locking in gains might more appropriately be called hedging your bet. I'm not suggesting it isn't a wise thing to do, only that it is a conservative move that limits both you losses and your gains. True. I'm not a big fan of Jim Cramer, but I think he calls it "sniggling." If a stock goes up 100%, many investors will sell half of their position. They're then playing totally with the house's money, and they can't lose anything. Yes, that's more conservative than letting the entire position ride, but it eliminates the possibility of a loss. Most stocks don't go straight up, of course, so traders often trade using a portion of their position and they hold what they call "core shares" for the long term. |
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Post by zendancer on Aug 29, 2016 6:23:56 GMT -5
Generally speaking the less emotion involved in the choice of what to invest in the better, but timing is a different story, and anyone who tells you not to time the market simply doesn't understand it. That decision also has some rational factors, but it's not a simple notion. For example, the aforementioned 25% on the S&P is when you'd start averaging in. If you're looking to call an inflection point in a market (overall or a specific stock), you look to volume -- which can work either way, you're looking for extreme light or extreme heavy, but the inflection might not happen. You also look for widening "spreads". That's the difference between what the market-makers are willing to buy and sell at. When there's less liquidity in a market, there's more uncertainty in it's direction. There's a bit of a cat and mouse game that goes on when the tides are ready to turn and lots of time the market will move counter-intuitively in the short and mid term which is referred to as "buy the rumor, sell the news". Ultimately, pulling the trigger on a any given buy or a sell is only ever 100% rational if you've got inside information. You have to remember that the players are trying to anticipate outcomes across various time-horizons, and the problem presents, how do you make rational decisions about an imagined future? I'm not understanding why an investor should employ his emotions in making timing decisions. I also see no problem with trying to make rational decisions about a hypothetical. Yous guys have a lot of investment info you want to share, but my investing days are over. My focus of inquiry is very narrow here. LOL. I doubt that your investing days are over. Thinking like an investor applies to many more things in life than the stock market. It applies to anything that is bought or sold as well as all kinds of negotiations. After housing crashed in 08, lumber prices fell to absurdly low levels. I didn't need any lumber at that time, but it was obvious that one could double one's money over a fairly short period of time. I bought a huge load of standard-dimensioned lumber and commonly-used components from Lowes at that time, and worked out an agreement to pay for it at a later date. I postponed having it delivered as long as Lowe's would allow and then put it in an outside storage location and covered it with tarps. Two years later I used the lumber to build a house. By that time the lumber had doubled in price. When Kroger's has a sale on some regularly-used item with a long shelf life, a person thinking like an investor will buy a huge supply and effectively save 50% or more over the long term. It's a no-brainer, and you probably do this kind of thing, too. |
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Post by enigma on Aug 29, 2016 10:38:31 GMT -5
I'm not understanding why an investor should employ his emotions in making timing decisions. I also see no problem with trying to make rational decisions about a hypothetical. Yous guys have a lot of investment info you want to share, but my investing days are over. My focus of inquiry is very narrow here. , and I gave you a few examples of those: numbers on volumes and liquidity. But ultimately, unless you know what's going to happen with a certainty, there's some other element that goes into any given trade.Now, you can look at this from the other direction. Market "panics" are always triggered by multiple participants suddenly moving big volume to limit their risk. These aren't naive individuals. Are their decisions to dump cold blooded or driven by fear? You could actually characterize it either way as what's going on in most cases isn't limited to the mind of a single individual. If it's intuition or educated guessing, there's no problemo, but if it's a need to mitigate feeling foolish, there's a problem, and that's what "locking in gains" is all about. As Tenka would say, if it's not a viable strategy then it's not a viable strategy. |
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Post by zendancer on Aug 29, 2016 11:16:20 GMT -5
Right, and I gave you a few examples of those: numbers on volumes and liquidity. But ultimately, unless you know what's going to happen with a certainty, there's some other element that goes into any given trade.Now, you can look at this from the other direction. Market "panics" are always triggered by multiple participants suddenly moving big volume to limit their risk. These aren't naive individuals. Are their decisions to dump cold blooded or driven by fear? You could actually characterize it either way as what's going on in most cases isn't limited to the mind of a single individual. If it's intuition or educated guessing, there's no problemo, but if it's a need to mitigate feeling foolish, there's a problem, and that's what "locking in gains" is all about. As Tenka would say, if it's not a viable strategy then it's not a viable strategy. Haha. You can't spend an unrealized gain; only a realized gain yields spendable money. The reason value investors sell out their positions when a stock reaches or exceeds their target price is to lock in the gains. They don't do that to avoid feeling foolish; they do it because the stock met their expectations based on their initial analysis of the underlying fundamentals. It's like stacking the odds in your favor. If you don't take advantage of a sale, then you don't lock in the savings. Similarly, if you don't lock in a big gain when it's offered, the gain may disappear. Sometimes, for example, a stock will suddenly rise or fall very rapidly for no obvious reason. It's usually because some big institution is entering or exiting a position in the stock and is purchasing or selling millions of shares. This causes a short-term spike upwards or downwards in the price. When this happens, he who hesitates often misses a big opportunity. It's wise to check the news when this sort of thing happens, which may take 30 seconds. If there is no news, then immediately hitting the buy or sell button can often capture an immediate gain or help set up a longer-term gain. |
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Post by laughter on Aug 29, 2016 15:22:43 GMT -5
Right, and I gave you a few examples of those: numbers on volumes and liquidity. But ultimately, unless you know what's going to happen with a certainty, there's some other element that goes into any given trade.Now, you can look at this from the other direction. Market "panics" are always triggered by multiple participants suddenly moving big volume to limit their risk. These aren't naive individuals. Are their decisions to dump cold blooded or driven by fear? You could actually characterize it either way as what's going on in most cases isn't limited to the mind of a single individual. If it's intuition or educated guessing, there's no problemo, but if it's a need to mitigate feeling foolish, there's a problem, and that's what "locking in gains" is all about. As Tenka would say, if it's not a viable strategy then it's not a viable strategy. Selling to mitigate risk is about as rational a choice as it gets when you're in the money, but you can always re-characterize that as worry about feeling foolish for having lost the chance in the future. |
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Post by enigma on Aug 29, 2016 19:19:09 GMT -5
I'm not understanding why an investor should employ his emotions in making timing decisions. I also see no problem with trying to make rational decisions about a hypothetical. Yous guys have a lot of investment info you want to share, but my investing days are over. My focus of inquiry is very narrow here. LOL. I doubt that your investing days are over. Thinking like an investor applies to many more things in life than the stock market. It applies to anything that is bought or sold as well as all kinds of negotiations. After housing crashed in 08, lumber prices fell to absurdly low levels. I didn't need any lumber at that time, but it was obvious that one could double one's money over a fairly short period of time. I bought a huge load of standard-dimensioned lumber and commonly-used components from Lowes at that time, and worked out an agreement to pay for it at a later date. I postponed having it delivered as long as Lowe's would allow and then put it in an outside storage location and covered it with tarps. Two years later I used the lumber to build a house. By that time the lumber had doubled in price. When Kroger's has a sale on some regularly-used item with a long shelf life, a person thinking like an investor will buy a huge supply and effectively save 50% or more over the long term. It's a no-brainer, and you probably do this kind of thing, too.Yes, and I always sniggle a little when I do it. |
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Post by enigma on Aug 29, 2016 19:24:41 GMT -5
If it's intuition or educated guessing, there's no problemo, but if it's a need to mitigate feeling foolish, there's a problem, and that's what "locking in gains" is all about. As Tenka would say, if it's not a viable strategy then it's not a viable strategy. Haha. You can't spend an unrealized gain; only a realized gain yields spendable money. The reason value investors sell out their positions when a stock reaches or exceeds their target price is to lock in the gains. They don't do that to avoid feeling foolish; they do it because the stock met their expectations based on their initial analysis of the underlying fundamentals. It's like stacking the odds in your favor. If you don't take advantage of a sale, then you don't lock in the savings. Similarly, if you don't lock in a big gain when it's offered, the gain may disappear. Sometimes, for example, a stock will suddenly rise or fall very rapidly for no obvious reason. It's usually because some big institution is entering or exiting a position in the stock and is purchasing or selling millions of shares. This causes a short-term spike upwards or downwards in the price. When this happens, he who hesitates often misses a big opportunity. It's wise to check the news when this sort of thing happens, which may take 30 seconds. If there is no news, then immediately hitting the buy or sell button can often capture an immediate gain or help set up a longer-term gain. Then you're saying it IS a viable strategy. So why wouldn't an investor buy in to a rebounding stock and apply that strategy? BTW, I wasn't suggesting that selling stock and realizing gains was done to keep from looking foolish. It would be pretty foolish not to. What I'm saying is that if snigling is done in response to an investment that has dropped severely and is rebounding, and is not done as an investment strategy that applies to any rebounding stock that you don't own, it's being done in order to recover emotionally. It would be a strategy not normally employed, but used in this case to make one feel better. Am I making sense? |
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