Comments on: The Secret To Market Success http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/ Debt free, financially independent and retired early Wed, 01 Feb 2012 18:00:10 +0000 hourly 1 By: Trading System Reviews http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/comment-page-1/#comment-45443 Trading System Reviews Sat, 28 Jun 2008 22:13:28 +0000 http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/#comment-45443 Stop losses are good in the right system, in others they are detrimental to it's performance and other exit strategies work better. The trick is to find the balance in getting a system that performs well, that does not have too harsh draw-downs and, most importantly suits you - both psychologically and in the amount of time you have to dedicate to it. However having said this, if you do not have the dedication to stick to your trading system, then it will never deliver the results.... The point about only having a low hit rate and making money is also very valid and you tend to find that this is closer to the results that the very best traders get. They want their winners to be home runs and their losers will never take more than a few percent of their total equity before they are sold. As an example to make this clearer, imagine that you have a 1 in 4 chance of finding a winner (25%) but on average your winners make 100% and your losers lose 10% each. If you start with $4000 put $1000 into each of your trades, this means that each loser will mean you are left with only $900. Since you had three of those, you now only have $2700 of your $3000 left. However your other $1000 trade is now worth $2000. This means that your original $4000 is now worth $2700+$2000=$4700....kerching! I wrote a fuller explanation of <a href="http://tradingsystemreviews.net/beginner/so-what-makes-a-good-trading-system/" title="So, what makes a good trading system" rel="nofollow">what makes a good trading system here</a> I hope it's useful. Stop losses are good in the right system, in others they are detrimental to it’s performance and other exit strategies work better. The trick is to find the balance in getting a system that performs well, that does not have too harsh draw-downs and, most importantly suits you – both psychologically and in the amount of time you have to dedicate to it. However having said this, if you do not have the dedication to stick to your trading system, then it will never deliver the results….
The point about only having a low hit rate and making money is also very valid and you tend to find that this is closer to the results that the very best traders get. They want their winners to be home runs and their losers will never take more than a few percent of their total equity before they are sold. As an example to make this clearer, imagine that you have a 1 in 4 chance of finding a winner (25%) but on average your winners make 100% and your losers lose 10% each. If you start with $4000 put $1000 into each of your trades, this means that each loser will mean you are left with only $900. Since you had three of those, you now only have $2700 of your $3000 left. However your other $1000 trade is now worth $2000. This means that your original $4000 is now worth $2700+$2000=$4700….kerching!
I wrote a fuller explanation of what makes a good trading system here I hope it’s useful.

]]> By: Gary Brown http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/comment-page-1/#comment-4944 Gary Brown Tue, 22 May 2007 04:57:54 +0000 http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/#comment-4944 The stop/Loss method of investing can only be used for individual stocks, is that correct? I work strictly in the auto and home insurance market but find the information extremely interesting. The stop/Loss method of investing can only be used for individual stocks, is that correct? I work strictly in the auto and home insurance market but find the information extremely interesting.

]]> By: mnc http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/comment-page-1/#comment-4835 mnc Sun, 20 May 2007 05:49:31 +0000 http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/#comment-4835 As Derrich mentioned, I did assume that this is generally true that you are selecting stocks that meet your appropriate criteria. However, even when you have picked the right stock for the right reasons that doesn't always mean the price is going to do what you expect it to do and stop-losses protect you. One common complaint with a stop-loss is that when triggered it becomes a market order and opens the door to losing even more money on a sharp drop. However, I believe that is the extreme and while possible it is not very common. As Derrich mentioned, I did assume that this is generally true that you are selecting stocks that meet your appropriate criteria.

However, even when you have picked the right stock for the right reasons that doesn’t always mean the price is going to do what you expect it to do and stop-losses protect you.

One common complaint with a stop-loss is that when triggered it becomes a market order and opens the door to losing even more money on a sharp drop. However, I believe that is the extreme and while possible it is not very common.

]]> By: Derrich http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/comment-page-1/#comment-4825 Derrich Sun, 20 May 2007 02:13:15 +0000 http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/#comment-4825 Rightly so. However, I think this post assumes that you've already gotten to that point in your investing decision...although I can't speak for Derek. Rightly so. However, I think this post assumes that you’ve already gotten to that point in your investing decision…although I can’t speak for Derek.

]]> By: George http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/comment-page-1/#comment-4820 George Sat, 19 May 2007 23:44:51 +0000 http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/#comment-4820 Using stop losses is not the real answer to stock market success. The real secret is to only invest with a significant margin of safety in stocks where you are comfortable estimating their "true" intrinsic value. Using stop losses is not the real answer to stock market success. The real secret is to only invest with a significant margin of safety in stocks where you are comfortable estimating their “true” intrinsic value.

]]> By: mnc http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/comment-page-1/#comment-4701 mnc Fri, 18 May 2007 13:36:20 +0000 http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/#comment-4701 Thanks Derrich! Your post and my subsequent comment there inspired me to put some thoughts together for a post of my own. Thanks Derrich! Your post and my subsequent comment there inspired me to put some thoughts together for a post of my own.

]]> By: Derrich http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/comment-page-1/#comment-4698 Derrich Fri, 18 May 2007 13:01:59 +0000 http://www.mynewchoice.com/2007/05/17/the-secret-to-market-success/#comment-4698 Couldn't have said it any better myself. Great post! And thanks for the link love. Couldn’t have said it any better myself. Great post! And thanks for the link love.

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