Just to give a different perspective, the strategy works well in bull markets. I practised it and it really worked in 2009-10, when I was using closing highs. It gave me clean runs in several stocks.
TTK Prestige - 300 to 1500 without any 15% fall.
Lupin - 900 to 2000 w/o any 15% fall
corp bank - 225 to 700 w/o any 15% fall.
Recently, Ajanta pharma has given similar run from 350 to 800 before falling 15% from closing highs.
Though many good stocks stop you out. Like recent Titan, bata, bajaj corp examples.
Hmm....this seems to have worked out very well for you and congratulations on some good wins
Would be nice if you could post regularly on your picks and rationale so that we too can make some money. (I think i noticed your active posts only on TTK)
Personally, I'd be pretty sceptical about any numeric system which just works unless they are cheap/expensive proxies like buy the stock market at 10 PE and sell it at 20 PE or buy when PE < (ROE/2) etc
Stopping out of a position is primary reason why I don't post my stocks. One has no rational explanation as to why one exited a particular position. Also, it kind of gives you freedom to take action without explaining to others.
My current thinking is that in bear markets, one must follow Buffet style investing. Buying good companies cheap and holding on to them is probably the best approach. But, as you sense that market is booming you switch to trailing stop losses of this kind. That could provide you with arsenal to buy stocks when markets are really cheap and in clear bear trap.
Based on this thinking, I have stopped following this method for time being. Current plan is to exit only on earning disappointment.
Stopping out of a position is primary reason why I don't post my stocks. One has no rational explanation as to why one exited a particular position. Also, it kind of gives you freedom to take action without explaining to others.
Thanks for your post.
Do put up any buys you make.
Your explanation for a sale could be as simple as "I followed up on my gut"
"The tipping point is another Malcom Gladwell classic which discusses how a collection of small things causes big change. Most of the time people argue and debate about the origin of a big change whereas the real reason could be so small that it would not catch the naked eye upfront except in hindsight. The author discusses various historic precedents and how this small change actually sets on like a spark and affects the entire chain of humanity as a forest fire. Malcom Gladwell calls this phenomenon the tipping point. It is almost akin to one person having AIDS and how he transmits it through multiple sex partners and slowly it spreads to the entire town and city whereas this person could have died just after he was diagnosed with AIDS and before he contacted any new partner.
Though this book is not about the stock market the learning of this book could very well be applied to it. This is an interesting extract from the book:
" .... conducted a series of studies to try to understand what they dubbed the "bystander problem." They staged emergencies of one kind or another in different situations in order to see who would come and help. What they found, surprisingly, was that the one factor above all else that predicted helping behavior was how many witnesses there were to the event. In one experiment, for example, Latane and Darley had a student alone in a room stage an epileptic fit. When there was just one person next door, listening, that person rushed to the student's aid 85 percent of the time. But whensubjects thought that there were four others also overhearing the seizure, they came to the student's aid only 31 percent of the time. In another experiment, people who saw smoke seeping out from under a doorway would report it75 percent of the time when they were on their own, but the incident would be reported only 38 percent of the time when they were in a group. When people are in a group, in other words, responsibility for acting is diffused. They assume that someone else will make the call, or they assume that because no one else is acting, .... the lesson is not that no one called despite the fact that thirty-eight people heard her scream; it's that no one called because thirty-eight people heard"
Edited by basant - 26/Aug/2012 at 4:15pm
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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