Forum Archive Index - February 2000

["Osbert Sun" <osbert.sun@xtra.co.nz>]

Peter Robertson wrote:

 

Was just thinking......all those people baling out of shares, many of them cite that their "stop-loss" has kicked in, so they sell, ...given the cyclical nature of the sharemarket, and obviously we are presently near the bottom (we hope) of a downward wave- we've seen it before... & before too long things will be rising, well, aren't these "stop-losses" a bit nonsensical. Personally, I would rather hang on for the ride, than bale & get depressed. You might say "Oh yeah, but what if you can't afford to lose the money".. but surely if you can't afford to lose the money, why be in the market. To my mind this "STOP-LOSS" mentality could be what is ailing our market.

Good question Peter! "Stop-loss" is mainly practiced by market traders to: (i) protect themselves from heavy losses in stocks of extremely risky nature, and (ii) protect against "profit-erosion" in a falling market. Personally I don't use stop-losses unless I'm sure that the market will be falling further and that the same stocks could be picked up again at a much attractive price later. As far as I can see our market is in a "confused" stage at present and that it's very hard to tell which way the market is to go. So I'd rather sit tight and wait than exit my positions prematurely. However, I do select my stocks based on some fundamental factors thus I'm not too concerned if the market does fall further.

 

Regards,

Osbert Sun