Stop Loss

fezziwig

I'm currently not using the stop-loss facility provided by H-L and I really think I'm being very foolish not to. David Cameron recently said “red warning lights are flashing on the dashboard of the global economy” and Mark Carney that "a specter is now haunting Europe - the specter of economic stagnation.”

As we know, stock prices tend to rise relatively slowly over years but take only days to plummet, so making use of Stop-Loss seems to be a no-brainer.

What are the rest of you doing? .... got questions like

What strategy are you using, what has served you well and what hasn't?
How did you decide on your Stop-Loss price (bid price) and how frequently do you check/adjust it?
Had any positive or negative experiences?

I don't know how many other nominee account holders other than Hargreaves Lansdown are providing this facility, maybe this is one advantage they have over the others to justify their high charges.


thanks in anticipation

Linton

I and most long term investors, as opposed to traders, dont use stop loss. If you are investing sensibly rather than punting on risky gambles why would you want to sell when the price has dropped? Why should a random fluctuation invalidate the reasons for buying the share in the first place? Unless you believe the end of the world is nigh, at some stage the price will rise, probably before you can get back in again. Having sold what do you buy? Perhaps a share currently in a dip, like the one you have just sold.

Investing is for the long term, most of what happens in the meantime is just noise.

PeacefulWaters

David Cameron recently said “red warning lights are flashing on the dashboard of the global economy

General election in six months.

Cameron's mob seem to be the party "trusted" with seeing us through difficult times.

Milliband's mob seen as economically iffy.

So the PM throws out warnings of troubles ahead (caused elsewhere of course) to try and get re-elected.

Or he may just be getting his excuses in early.

Either way, don't let David Cameron's words guide you.

gkerr4

i use stop losses. i think they are effective - if you are an active investor then i think they are a must.

The days of buy and hold are long, long gone.

Over the past couple of years i have focussed on improving my discipline over stop losses and taking losses early and little as well as improving my general fiscal discipline. This has paid massive dividends to my annual returns.

TheTracker

gkerr4 wrote: »

The days of buy and hold are long, long gone.

Please explain.

ColdIron

gkerr4 wrote: »

The days of buy and hold are long, long gone.

It depends what your objective is, if you bought them for income you pretty much want to B&H

Linton

gkerr4 wrote: »

Over the past couple of years i have focussed on improving my discipline over stop losses and taking losses early and little as well as improving my general fiscal discipline. This has paid massive dividends to my annual returns.

What investment have you held that continued to fall beyond the normal ups and downs of the market?

Glen_Clark

fezziwig wrote: »

David Cameron recently said “red warning lights are flashing on the dashboard of the global economy”

Anyone who took Cameron's pre election promises seriously would have kept their savings in cash - link: http://www.telegraph.co.uk/finance/personalfinance/pensions/10457090/Camerons-broken-promise-to-savers-costs-68bn.html

fezziwig

Thanks for the feedback folks.

Linton wrote: »

What investment have you held that continued to fall beyond the normal ups and downs of the market?

Well here's one example, BT.


When the FTSE 100 peaked at near 7000 in Jan 2000, BT peaked at 1500p. A blue chip share that certainly didn't look a "risky gamble" back in those days. It's subsequent market slide made Tesco's recent problems seem like a splash in the pan. Dipped to a miserable 78p in Jan 2009. Even after it's recent better days it's only managing 410p.


You also say .... "I and most long term investors, as opposed to traders, dont use stop loss."

But fine words butter no parsnips as the saying goes. Even a half decent stop-loss strategy would have saved the poor old BT investor a bundle if they'd bought shares anywhere near the peak.




and you go on to say..... "If you are investing sensibly rather than punting on risky gambles why would you want to sell when the price has dropped?"
To save yourself from even heavier losses if the price continues to fall.


If you're only tracking major indexes then of course the risk is massively less over the long term but for anyone investing long term in so called blue chip shares, I'm not convinced that stop-loss isn't worth bothering with.

Linton

fezziwig wrote: »

......

Well here's one example, BT.


When the FTSE 100 peaked at near 7000 in Jan 2000, BT peaked at 1500p. A blue chip share that certainly didn't look a "risky gamble" back in those days. It's subsequent market slide made Tesco's recent problems seem like a splash in the pan. Dipped to a miserable 78p in Jan 2009. Even after it's recent better days it's only managing 410p.


......

BT didnt crash in isolation. In those days BT, and the whole of communications, was seen as high growth tech rather than little more than a utility. And of course high growth tech had an enormous bubble.

If you were investing sensibly and rebalancing say annually you would have allocated a fixed % to tech (perhaps no more than 10%, 20% if you were bullish) well before the bubble, steadily took profits as the sector prices rose reinvesting elsewhere and then reinvested into tech as the sector collapsed. So you would be holding a large number of BT shares when the price reached 78p and benefitted from the 5-fold increase since.

What would a stop-loss believer have done? Sold at say £10 in 2001 and invested in what? Perhaps in a guaranteed tech tips share that went bust a year later.

Sure, if you base your investing on one-off "red hot" share buys looking for maximum short term growth you probably need a stop loss. You certainly need something to slow down your almost inevitable long term losses.

Heedtheadvice

( shhhhhhhhhh Linton, don't remind me of ....the banks...........)
I too am long term investing but I wish I had a stop loss set for some banks!

Collective investments now always get my vote and generally less need for a stop loss there, I think.