Profit from stocks

bowlhead99

aroominyork said:

pioruns said:

aroominyork said:

pioruns said:

Old_Lifer said:

I would agree  totally with   Prism .

If you had invested in funds  the risk would be spead   but you have chosen to invest in individual shares which is much riskier.   You may simply  have been 'lucky'  with your timing.    If you want  a quick profit , it may be better to take a £2000  profit now, rather than let greed  take over and   hang on for months  or years ,   chasing that £5000  profit at the end of the rainbow.

Why would he exit now, when he can use stop loss to exit in controlled manner, and potentially securing more profits without risking anything?

OP has £11,000 of stocks. You say that setting a stop loss at 10% below that does not risk anything. Nonsense - it risks £1100.

Nonsense - unless OP is trading penny stocks, maybe then he can have big slippage.

OP put in 9k and now is +2k in profit. By selling right now, he locks that profit of 2k and takes it home. 100% chance of 2k profit and 0% of more profits.

By putting stop loss back at his purchase price for example, he risks zero of his initial capital and 2k of profits he made. Hes got 99% chance of profit between 0 and many thousands (if markets continue to go up) and maybe 1% chance to have *any* loss if market EVER slips.

By suggesting to sell now, he have 0% chance to actually gain more than his random 2k he made as of right now.

You obviously never heard of "cut your losses short and let your profits run".

Poker players know that when deciding whether or not to call a bet, you look at the odds you are getting for the bet; you do not take into account the money you have already put into the pot – that is dead money. Likewise, it’s emotionally natural but financial nonsense for the OP to focus on his original capital. He now has £11,000 and that’s what he risks losing part of. If he had started with £900 would you suggest a stop loss of 91% because he would still not lose any of his original capital?

I would agree with that. Thinking 'well I could lose all these profits but it wouldn't really cost me anything, only 1% loss if the market ever slips, and really it never would slip because this is not some penny stock' seems quite a shortsighted way of looking at it.   

If you have £11000 and the price is 110p, so you put the stop at 90p, you hope to get out with £9000. But it's not the worst case scenario because the market closes at 90.01 one evening, and then there is some bad news affecting the company or the sector generally, and the price opens at 87.5 the next morning (not at all an unrealistic scenario, given recent volatility in prices has allowed OP to make 20% in a few weeks)... and by the time the broker executes your stop order the price is 87p, your £11000 has turned into £8700 which is a 21% loss from the £11000 that you had available to you in your ISA.

Of course, if you're independently wealthy like pioruns, you can say, "well, I only lost 3.3% of my original stake, easy come easy go, making normal levels of investment returns is a bit boring and the only way to make life-changing amounts of money is to be brave and speculate, so it was worth giving it a shot and just run the winners and let it ride until I see a big payoff. Ah well it didn't work out this time. Try again tomorrow with the £8700 I recovered from the £11000 of bad investments.

However to someone who has been goaded into buying a few speculative shares by his mates and has seen them go up by a little over a fifth in a few weeks, he now has £11,000 but doesn't know if they will be worth £9000 or £13000 by the end of the week. If he wants to risk a 21% loss to try and make another gain like he made in the last couple of weeks, then OK, although most stocks that rise by a fifth in a few weeks don't continue to rise by another fifth every few weeks until the year is up.  If the companies do badly and holding the stocks with a stop loss at £9000 doesn't work out for him, he will have turned £11000 into £9000 or less. So, I wouldn't pretend that scenario of  cashing out today's shares at £9000 or less is 'just a 1% chance of ANY loss'. It is perhaps a greater than 50% chance of a 21% loss.

[Deleted User]

aroominyork said:

pioruns said:

aroominyork said:

pioruns said:

Old_Lifer said:

I would agree  totally with   Prism .

If you had invested in funds  the risk would be spead   but you have chosen to invest in individual shares which is much riskier.   You may simply  have been 'lucky'  with your timing.    If you want  a quick profit , it may be better to take a £2000  profit now, rather than let greed  take over and   hang on for months  or years ,   chasing that £5000  profit at the end of the rainbow.

Why would he exit now, when he can use stop loss to exit in controlled manner, and potentially securing more profits without risking anything?

OP has £11,000 of stocks. You say that setting a stop loss at 10% below that does not risk anything. Nonsense - it risks £1100.

Nonsense - unless OP is trading penny stocks, maybe then he can have big slippage.

OP put in 9k and now is +2k in profit. By selling right now, he locks that profit of 2k and takes it home. 100% chance of 2k profit and 0% of more profits.

By putting stop loss back at his purchase price for example, he risks zero of his initial capital and 2k of profits he made. Hes got 99% chance of profit between 0 and many thousands (if markets continue to go up) and maybe 1% chance to have *any* loss if market EVER slips.

By suggesting to sell now, he have 0% chance to actually gain more than his random 2k he made as of right now.

You obviously never heard of "cut your losses short and let your profits run".

Poker players know that when deciding whether or not to call a bet, you look at the odds you are getting for the bet; you do not take into account the money you have already put into the pot – that is dead money. Likewise, it’s emotionally natural but financial nonsense for the OP to focus on his original capital. He now has £11,000 and that’s what he risks losing part of. If he had started with £900 would you suggest a stop loss of 91% because he would still not lose any of his original capital?

OP has his own brains and will decide when and where you use tools given to every trader - which is a way to exit from the trades - by Stop Loss and Trailing Stop Loss (if available). Numbers I've given, let it be 10% from current price or whatever - I just given an example.

What I am highlighting is that exiting now, without giving it any thought will limit OP's profits tremendously - it's not very smart, that's all. Controlling when to exit is the only part of the trade OP has got left. By using Trailing Stop Loss or simple Stop Loss he is opening himself to much more profits with little to no risk of his capital, potentially securing even some of his profits on open trades - all depending if and where will OP set the orders.

Stargunner

It would be a good idea if the op informed us of what companies they invested in, because the advice would possibly be completely different depending on whether they were aim listed companies or FTSE 100 companies. 

steampowered

OP put in 9k and now is +2k in profit. By selling right now, he locks that profit of 2k and takes it home. 100% chance of 2k profit and 0% of more profits.

By putting stop loss back at his purchase price for example, he risks zero of his initial capital and 2k of profits he made. Hes got 99% chance of profit between 0 and many thousands (if markets continue to go up) and maybe 1% chance to have *any* loss if market EVER slips.

By suggesting to sell now, he have 0% chance to actually gain more than his random 2k he made as of right now.

You obviously never heard of "cut your losses short and let your profits run".

The Op has £11k worth of shares. What the Op paid for those shares is irrelevant. Those shares are worth £11k regardless of whether the Op originally paid £9k or 9pence.

£11k is the benchmark. If the Op sold his shares today and invested in a global tracker instead, he'd have £11k to do that with - not £9k. Talk of "initial capital" is meaningless.

[Deleted User]

@steampowered OP should decide. We don't know what is he holding do we. It could be penny stocks where stop losses are irrelevant. But it can be SP500 where stop losses are useful and should be used.

If he's to follow your advice then he crystallises  his profit of 2k, without ever giving himself a chance to let it run (as we should do with the profits!) potentially reaching much higher numbers while risking fraction of the amount (that's what stop loss is here for).

Cut your losses short let your profits run - i didn't invented that, it's the market rule, if you do the opposite then you shouldn't be trading the stockmarket.

steampowered

pioruns said:

If he's to follow your advice then he crystallises  his profit of 2k, without ever giving himself a chance to let it run (as we should do with the profits!) potentially reaching much higher numbers while risking fraction of the amount (that's what stop loss is here for). 

That would only be true if the Op exited the market. If the op sold his current stock then invested in £11k of something else (e.g. a global tracker), that something else could also make a profit.

At the end of the day the Op has an asset of £11k, and the asset should be invested in whatever is most suitable for the Op's needs. It is most unlikely that will be an individual stock.

[Deleted User]

@steampowered I generally agree with you, but OP didn't updated us with information what stock is this all about, so all we can do is speculate. Either way, OP have been presented with ways to exit his position, hopefully he will use it wisely.

sairy.gamp

SueRight said:

Hi.
I put around 9k savings into several stocks inside an isa a few weeks ago. I’m around £2k up in profit. Should I cash out as I’m worried in case of a 2nd wave of the virus causing another crash.  My friends said I should wait until it reaches 5k profit and are encouraging me to deposit the rest of my savings, leaving only a few hundred or so left for a rainy day.  I need to realistic advice. Thanks.

As others have said a 'Stop Loss' system would work well for you here. Set the percentage to your own appetite for potential loss. 15% - 20% perhaps? For example, £1 share price @ 20% stop/loss - sell at 0.80p. Price goes up to £1.10 - sell at 0.90p. Keep advancing your original stop/loss amount - never reduce it.
That said, As Warren Buffet said "nobody ever starved by taking a profit" either. Decisions eh!

csgohan4

OP hasn't come back, another one hit wonder?

MaxiRobriguez

Op invested all their last money apart from a £5'er on gold and is now smokin' cubans in Madagascar.