Re: [CANSLIM] Know your exit before you enter

From: Tomas <tomas986@yahoo.com>
Subject: Re: [CANSLIM] Know your exit before you enter
Date: Wed, 27 Aug 2003 15:01:28 -0700 (PDT)

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Good illustration DMC.

Off subject a little, I have been noticing that a few
people are implying (in their messages) that they do
not follow WON's rule of keeping the number of stocks
in your portfolio small.  I forget the exact range,
but WON said something like this:

Cash:
$5000  : 2-3 stocks
$5000 - $10000 : 3-4 stocks
$10000 - $25000 : 4-5 stocks
...

DMC mention about just using 5% of your portfolio for
a stock(can have 20 stocks).  Don, I think mention
about 10% of your portfolio for each stock(10 stocks).
 I understand the need for risk management.  I like
the idea to keep the risk of the loss to 2% of your
portfolio.  So, with an 8% loss, you should use up to
25% of your portfolio for each stock.  That's 4 stocks
for a portfolio if maxed out.  I like the idea of
minimizing the number of stocks I should own at one
time.  I do not think I can handle more than 10 stocks
at a time.  Sounds like some of you guys own a lot
more stocks at one time.

Maybe you guys have a huge a mount of cash in your
portfolio, do not want to put so much money on each
stock :).

tomas

- --- DMC197807 <dmc197807@comcast.net> wrote:
> 
> Ian,
> 
> Brilliantly and concisely stated.  If people want to
> achieve 30% or 50%
> returns on their entire investment porfolios it is
> crucial that they
> preserve and protect the few managed positions which
> can fly 200-300%.
> Because of position management, it will only be a
> 300% return on 5% of your
> porfolio, so the portfolio gain is more like 15%,
> and has to be aggregated
> with those pesky 8% losses on 5% of the port (each
> of which hits your bottom
> line 0.4%--8% X 5%).  You can easily see, if you can
> manage the following
> returns on twenty 5% positions, then the portfolio
> results can be handsome:
> 
> Twenty positions at 5% each, maximum loss of 8%, 3
> "big casino" winners:
> 
> 300
> 200
> 100
> 10
> 8
> 8
> 7
> 5
> 2
> -8
> -8
> -8
> -8
> -8
> -8
> -8
> -8
> -8
> -8
> __
> 
> 560, or a 28% aggregate return, provided you let the
> winners run.  If you
> get nervous and drop out of the top three trades
> after only 30% gains (that
> is subtract 600, and add 90), you end up with only a
> 2.5% gain for the year
> (50 / 20).  For all your conscientious work.
> 
> DMC
> 
> >
> > IMHO, identifying a pre-determined profit, and
> selling a stock
> automatically
> > once it reaches that level, flies in the face of
> CANSLIM. The whole point
> of
> > listening to the market, and letting the tape tell
> you which stocks to
> trade
> > (and when) is very reactionary, and falls under
> the age-old classic mantra
> > 'the trend is your friend'.  Why would anyone
> arbitrarily sell a breakout
> > stock after a small 20% profit in a strong bull
> market? It makes no sense
> > whatsover.  Given that many stocks are up 400%+
> since the market turn on
> > March 12, you would be defeating the entire
> purpose of patiently wating
> for
> > a confirmed bull market and then riding breakout
> leaders.
> >
> > I think that some people confuse this with having
> a target 'stop' sell in
> > mind immediately after buying a stock. Making sure
> you know exactly when
> you
> > will sell if the trade turns against you is
> essential risk management. But
> > it isn't something you should do if the trade is
> working in your favour.
> >
> > Ian
> >
> 
> 
> 
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