Friday, March 18, 2016

Stop loss. vs Cut Loss

My own understanding of the two is: 

Cut loss, when fundamental has changed or your underlying assumptions made in the company has changed/ no longer valid. 

I cut loss, when I invest in PRA, the currency is not undergoing headwinds and 1 MDB is not well publicized, but when I look at the 2 risks which I didn't account for, I cut loss. It would otherwise be a 60% loss and not 10% loss. 

Stop loss, is like, to me, a percentage loss u accept and throw in the towel. For example, 10% and I go for capital preservation. 

This is the part that is causing some dissonance in my head. If I said price drop 10% and I am wrong, it's like saying market efficient theory is correct and I can "catch a company" near bottom. I dun believe in this. 

At hindsight, I am lucky that market rebounded. It's just pure luck, really make no meaning trumpeting that I bought and have my balls with me Blar Blar Blar, because it could easily fall another 10%, the other camp could be trumpeting. The key here is did you execute your plan and did it work well.

I did except for SCI. All my counters bought recently are in the green but the average price might be just above water. Be careful of bloggers who said they made x% in the last 2 months. 

If like that also can, I make 20% for STE (AV price is just above water thou) ,
Before market rebound, I already make 20% and 30% for gold and cogent. Given I used the sale money to buy CMPH and STE, I could even lump the gains together and give u an eye popping figure. But my portfolio I think just do ok. Not too sure if it is green or red. But I think u get my point.

So, I could have done better definitely if I have do it differently with SCI.

I could have:
1) stop loss at 10% or/and
2) accumulate at below 2.5

It is not really an analysis problem because drill ships cancellation is within my calculation but not the impact of fall in SCI. So cut loss is not "activated"

Given SCI give only OK dividends I cannot really wait out the loss unlike LMIR and Lee metals 

So how? So I improve my balls or should I introduce cut loss? 

Or should I let it be? 

SMoL, coaching can do online and drinks "ortan"? LOL


  1. We also need to manage cut losses into cash and that is another skill or craft. Some after cutting losses, they stay in cash far too long waiting for the next opportunities that never come. Never easy in the stock market. We need mentors. Free online mentors?

    1. Stop loss is for traders. Cut loss is for investors :-)

    2. *couldn't hold it in, spilt water while drinking*

  2. Sillyinvestor,

    I'll write a post and link back to your post.

    You've asked a very good question ;)

    I better answer properly to counteract CW inventing his own interpretation...

    1. SMOL,

      My concept is rather similar to CW. If u intent something to be short term then you deploy stop loss. In. Fact, if u look at Rolf answer, he has the same concept too.

      Waiting eagerly for your answer.

      But after writing, I think i have no answers ... Usually I self answer

      The only thing perhaps is volaity is price movement is pet or analysis

      It seems there are beta and alpha stocks in my portfolio without my knowing but I am glad they are like thay

  3. Hi SI,

    Nowadays after doing some spring cleaning of my portfolio, I split my portfolio into core n trading portfolio.

    Core is the one which I don't meddle with and let it grow and DO NOT CUT loss even if I suffer paper losses.

    Those for trading is to have some fun in the up and down and should then have the cut/stop loss (only when loss is small, otherwise "loon" or just profit taking mentality.

    Since we are working full time, our trading method should not be like those of SMOL who is a daily prick -in/out! haha.

    It should be more like CW where r able to loon n must have a deep pocket! Not sure correct, just the way I understand myself and my way of doing it.

    So to be frank, overall, I am still a long term investor with short term interest!


    1. Hi Rolf,

      I dun have a core position ... Everything is up f a sale at the right price ...

      There is no crisis price which I bought yet ?

  4. Hi SI,

    I will say that stop loss is what you've planned for before you actually take action. Cut loss is when you've no choice! lol

    You want to buy a new toy because you've just received your bonus. You research and say that you will never above $100. If $101 you will walk off without it. But when you reached there you realised it's selling at $120 and it's the last piece left! You realised you can't do without it as you've been thinking day and night. So you 'cut loss' and buy it at $120. Shut up and take my money!

    1. LOL I only stop loss. no cut loss.

    2. Akamak LP and SMK!!

      I think I really Siao Liao !!

      I just realize I was thinking of what to reply, in my mind and thought I replied lol

      And I thought I didn't Joyce lol

      LP, your example while applying to consuming is the same as investing ...

      So easy to cheap talk that I will but XYZ counter when it is durian picking season at $3 for maoshengwang. When maosanwang is $2 because of good harvest, we think a... Something is wrong huh? Why so cheap

      When it is $10, shut down and give me that last maosanwang !! It is going to be $12 tomorrow

  5. Hi Sillyinvestor,

    I've not cut loss or stop loss before for my investments so I can't comment. Instead, I'm sitting on paper losses now for my stocks. I don't use stop loss for my investments before I don't own more than $10k in value for each counter and have not cut loss because I bought them just last year. But ACCICB has cut loss before for Genting and GLP, both investments which I didn't approve of but I knew about it after he bought them. He made big losses in both, can't remember the exact % but it is double digit. Both stocks have gone down more ever since he sold them so on hindsight it was good to cut loss but then in the future years, who can tell. It was more of getting back what he can and using that money to put in better investments.

    1. Hi Joyce!!

      Oops !! I thought I replied your message !! So sorry , not sure whether u will see this reply thou... Hehehe.:.

      Actually, after this round of exercise, mental... I mean. I dun think I will change anything except keep more cash? Lol

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