Replies to post #33610 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

Hi Steve - Imagine if you will a mechanism that would essentially cut off the big market downswings eating away at one's portfolio value. One that converts most of that probable value reduction into cash, which will be flush and ready for the inevitable return (reversion to mean).

The stop-loss style I've outlined many times perhaps

Rule 1 - never lose money. Rule 2 - never forget rule 1.

Switching between real and virtual to avoid large losses. If year on year at worse the value breaks even (or close), and you were switched out from real into virtual, but then at the start of the next year the stock price was low when you switch back from virtual to real !!

[aim hier]

Steve,

I've considered a stop loss for some time. It's recommended by most trading publications. If one is trading with a lot of leverage, it makes sense. It could be the difference between success and failure.

But I use little leverage. If I have conviction that I'm investing in great businesses or sound economic interests, then I want to be exploiting lower prices, not retreating from them.

Besides, if you let an automatic stop loss take you out, when do you know to go back in?

[lostcowboy]

So I suggest that our next 'group-think' task is to figure out how to incorporate an Automatic Stop Loss mechanism into AIM.

You may want to start reading up on Welles Wilder's Parabolic SAR.
chart

As with most indicators, the signal quality depends on the settings and the characteristics of the underlying security. The right settings combined with decent trends can produce a great trading system. The wrong settings will result in whipsaws, losses and frustration.

[OldAIMGuy]

Hi Steve, Great game! Nail Biter!

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