A.I.M. Users Bulletin Board

[PraveenP]

Hi Adam,

I tend to use individual stocks more than ETFs with my Stock Trading Riches system (which rebalances positions like AIM does), and the way I protect against deep divers is to think of the position as a "slot" which is currently occupied by the stock.

Then, you can set criteria to decide when to replace it (for example, you could set an absolute stop like "50% below your initial purchase price" or depend on more subjective criteria like loss of volatility or fundamental change in the business).

At that point (or perhaps at the next buy signal), you would completely sell your position in the stock and buy a new stock.

If a position becomes a deep diver, you could still substitute it for a new stock that you believe will appreciate.

As long as you are replacing stock A with the same value of stock B, the formulas won't break.

Praveen