Hello EXTelecom,
I noticed you would cover yourself with s stop/loss after the rise is big enough. How about the protection on the downside?
I am not a big fan of stop/loss protection as it prevents the AIM of doing its work, but if you use the stop/loss on the upside why would you not use it immediately as you start the portfolio? I am not really against using the S/L either...It makes a lot of sense for a cyclic stock. It could even be an execellent strategy as an alternative form of AIMing.
If one can prevent geting into stocks that cycle downwards the S/L would result in an AIM-like response with the biggest steps possible: sell the whole lot at the top and rebuy the whole lot at the bottom. This can only be a problem if the stock systematically cycles downward.
I have never used this apptroaqch, yet, but I can not escape the feeling that it might not be a bad system for stocks that cycle upward. In any case, my thinking for the AIM is also to make the steps as large as possible so that the effciency of the invested money is the greatest...keeping enough liquidity to buy at the bottom.
If I am honest with myself then I should combine this waiting for the bottom with a stop/loss. The sense of all this is, ofcourse, that if the drop is severe it is much, much more efficient to bail out and get back in at the bottom. This method requires however quite a good "feel" for when the bottom is reached, or when the stock is on its way back foor a long stretch.
Any thoughts on this?
Conrad
