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LET YOUR WINNING STOCK RUN : DON'T HANG ONTO LOSERS ... FALSE

While one expert says "let your winning stocks run", another will say "no one ever lost money by selling at a profit.. . Another will say "you haven't made a profit till you sell". So which is it? Advisors choose which to trot out according to hindsight. All the following examples are of the same class, impossible to be useful in real-time, so very patronizing, and insultingly simplistic.

Some experts tell you to only trade after trends are confirmed. They say "wait until a bottom is confirmed by a 10% move up" and "use stop losses trailing at 10%". According to this advice you would earn only 7% for every 30% price movement (see figure to right). You would earn nothing if the price moved 'only' 20%.

After a stock falls sharply one expert will say "you missed a beautiful buying opportunity" if you did NOT buy and the stock rebounded. Another expert will call you a "sucker for buying on a dead-cat-bounce", if you bought and the stock continued down.

Some experts tell you to "protect your capital above all". But the only way to do that is to buy risk-free government debt. Buying equities involves sitting through falling prices. If you sell every time the price falls you will only provide more data for the researchers who have shown that "no one can time the market".

Some experts criticize investors for "buying high and selling low" (as if people buy because they think the price will fall, or sell because they think the price will rise.) ... yet others advise the opposite: "buy stocks on a break-out" and "never catch a falling knife".

To criticize Retail Investors for not executing to this hind-sight perfection.!!!. At each and every point in time, all investors ask themselves; "Is this price move a blip, or a new trend?"; "Will this reverse, or just keep going?". Neither we nor the experts can know for sure. There is not one piece of trading advice that does not have its exact opposite, to be trotted out in hindsight. Do your best and ignore the experts.

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