Why We Never Use Stop Losses
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- Опубліковано 31 тра 2024
- Stop losses sound ideal. Buy a stock and limit your downside to whatever amount you're comfortable with - great! Not so much. Stop loss orders should really be called "realize loss" orders as they lock in your losses leaving you to guess when and how to get back in.
And if you don't want to get back in, then why did you even buy the stock to begin with? Stop loss orders simply have no place in the portfolio of a long-term investor, someone who wants to build wealth over the next few decades and isn't trying to speculate on short-term price action.
RESEARCH PIECES USED IN THIS VIDEO:
1. The Nanalyze Disruptive Tech Investing Methodology
www.nanalyze.com/nanalyze-pre...
2. Investing in 2023: It’s All About Managing Risk
www.nanalyze.com/2022/12/inve...
3. Why Swing Trading Strategies Won't Work
• Why Swing Trading Stra...
CHAPTERS:
00:00 Intro
00:21 About Joe
00:45 About Nanalyze
02:23 Our beliefs
03:36 About stop losses
04:34 Our methodology
05:41 Approaches to buying
06:50 Why DCA is key
07:46 Why you might use a stop loss
09:40 The problem with stop losses
11:08 Considerations
12:15 The importance of quality
13:12 Things to ponder
14:29 Our channel and some critics
ABOUT US:
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#stoploss
#stoplossorder
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Stop losses are for losers ONLY. You are advertising your willingness to sell below market price. And, of course, we all trust those greedy floor traders not to pick off our fools offering. Use options or forget about it.
There are some use cases where they make sense as the video pointed out but as a rule we think they're not a good idea. And your comment on "use options" needs some qualifying ;)
Thanks man!! I really love the content!!
That's what we like to hear, thank you for letting us know!
I love your channel! I know it’s been said before but soo waiting for you guys to drop an etf.
Thank you for the support! To have any chance at launching a successful ETF takes a lot of work and planning but that's in the roadmap.
A lot of people won't like this, but they don't have the capacity to understand the difference between speculation and investing. You make good points about stop losses. If you're a speculator, then it can potentially make sense to have one like a trailing stop. Some cases like NVDA or SMCI, those speculators may want to capitalize on these short term volatile movements.
If you're a long term investor then these stop losses aren't very, if at all useful.
I like that you do make this distinction in the video. If I had to make one suggestion I'd try to point this out explicitly near the start rather than near the end at 17:00. It's very rare the critics will have the ability to sit through all of this to listen to understand.
That all being said, I'm of the speculation side but still enjoy watching your breakdown videos of companies. I'd like to hear/see your thoughts on Vertiv ($VRT).
Very good summary of the video, and your suggestion is quite good. We've made that mistake before as people often comment in the first five minutes of watching. On your second comment, it's great to hear you say that. You differentiate between investing and speculating, then say you're on the speculation side. Understanding the differences and knowing where your inclinations are at any time shows great self awareness. Thank you for the comment! Oh, regarding Vertiv we usually raise new names on our Discord server so everyone can chime in. We get a ton of requests and that's one filter. :)
I agree 100% about the self-awareness aspect. One reason why I rarely discuss my financial activities with family and friends is that I do all of it, in different accounts, and for different reasons. Some of what I do makes people go very pale, and leaves them wondering if they'll soon need to lend me money for food. (So far, so good. So far...)I'm opportunistic, easily bored, and very aware when I'm outright gambling. It seems that many folks just confuse mostly themselves about what they're actually doing, and therefore have no real plan when entering/exiting investments or spec trades. @@Nanalyze
Very pertinent content and perspective!
Thank you for the feedback!
Great talk! Informative with the perfect amount of funny! Nice to match a face with a name. I appreciate your content! 🙏🙏
Thank you so much for the support! Our marketing team says I need to start showing my face more and they're really pushing for me to be on video as well (sighs loudly). Joe P.
@@Nanalyze 🤭🤣🤣🥳🥳🥳 Do it!
Thanks so much for this informative video. I was getting nervous about the CPI #'s coming out and I was going to put stop losses on most of my stocks. I have got stopped out a few times over the past couple of years. Two of my biggest mistake was getting stopped out on COP and PANW - esp PANW when I lost it at $212 only to see it zoom back up. From this info I now know what not to do with a stop loss. Thank you again for taking the time to put this together.
You're very welcome. We're glad you found this useful!
I just learned this the hard way. I had a Nvidia on a stop loss and it went down dramatically and then back up in the course of minutes. Never doing it again, just sticking to my guns, whether it goes down or not is just Mr. Market's craziness.
The old "market maker taking out the stops" move is always disheartening. We didn't even mention that, thank you for bringing this up. Plenty of horror stories out there about how extreme volatility - or even glitches - can lead to sharp losses.
I did the same for SMCI. Good company, growing fast, undervalued. There's probably a narrow set of reasons to use a stop loss but I doubt I'll touch them again.
Here's our piece on SMCI: ua-cam.com/video/aH_k_BlNPSM/v-deo.html
Great SMCI video. Yeah, I'm sceptical of them now, and wouldn't buy. My stop triggered last year, unfortunately.
@@Nanalyze yes, i did not technically lose money on it, but if I had just held on i would have made more. so i guess thats a form of losing money. yes I do believe it was a MM move
Great philosophical points in this PSA
Value!
Good to hear! Thank you.
Loving this channel have sent to my little group of investors
We really appreciate you sharing our content Don! That will help us grow faster and enjoy more network effects in our community.
Congrats on over 20k 🎉🎉🎉🎉🎉🎉
Now that's the sort of cheerleading we can get behind! Thanks man :) We're finally growing at a decent clip. Your support and encouragement means a lot. Please help us by sharing our videos and mentioning our channel and brand out in the wild. Thank you! Joe P.
@@Nanalyze Will do👌
Totally agree with this
We definitely wanted to spell out the thought process because it's not immediately clear when they're often talked about as a "must have" risk management tool. In trading stocks, definitely, but when investing in companies not so much.
Someday you guys will have so many viewers that you won’t have time to respond to all of us. 😢
But I’m sure we are all glad the movement is growing.
Great vid. Stop losses make zero sense with a DGS. I find myself lurking around just waiting for one of my dividend stocks to drop. A friend of mine calls many / most of the big drops in price for the good companies “ over reaction Mondays “ it doesn’t take much digging to see that a mass emotional overreaction has occurred. I love buying in those moments and my only regrets so far has been I didn’t have enough to buy more.
Long live Q
Joe P. here. Some channels respond to all comments but it's the richness in our responses that differentiate our channel. We want people to continue learning in the comments section. We also screen out low-value-add comments such as cheerleaders. We'll hire more people to help with "community management" as we scale and hopefully keep up with this tradition.
This video wasn't overly popular but I thought it was a quite important topic to address. Don't worry about "not buying more," just set objective rules (subject to change with time as you learn) and then you won't have many regrets. Yes, long live Q! It never disappoints. :)
I like the advice....
I like to utilize naked puts to buy into stocks.
I'll use covered calls to trim on assets that are getting high on the valuation.
In both scenarios I get the stock value or return plus the option premium.
Ive been burned by hype in the past and good compines go bad sometimes.
I believe 90% of stocks are crap companies. If they were real money makers they'd be private.
I dont have a degree, but ive taught myself to read 10k.
Dont read the tea leaves, read the financials.
Selling puts can be good if you have a big enough book. For most investors looking to DCA, it's tougher. Also then it tempts them to look at companies with smaller stock prices as more favorable :) Covered calls to trim assets, again, means you are working with quite a large book. Good job on teaching yourself to navigate a 10-K. Proper good advice in your last sentence. Thank you for the comment Brian in Seattle. Stay dry ;)
Tea leaves are for noobs. Pigeon entrails only for sophisticated investors like me.
I never use stop losses but I use stops where I break out even or make a tiny amount, if a stock keeps going then I keep moving my stop up to trail the highs a bit
Most brokers should allow you to set automated trailing stops
I would like you to consider starter videos for college age viewers which once complete then the viewer can jump into and understand your current videos. My daughters ask me so many questions when they watch one video....such as "what is the stock market; are all companies listed on the exchange; what does it mean to buy a stock; why is it important; how do I buy a stock". If you started a beginner channel and requested their input then their questions would help build the beginner video library. Even adults need this but the adults don't ask questions like the younger generation which will help build your video beginner series which then they can later become paid subscribers (like someone moving from a Toyota corrola to a Lexus because they like the brand). Please consider (sorry I posted this twice today but I really want you to see this post)
Good comment Brian. We did a piece targeted at young adults here: ua-cam.com/video/FwHaJv31T0I/v-deo.html
Please let us know what you think. We're not opposed to doing future pieces like that. Many more beginner videos can be found throughout our channel.
Some studies suggest lump sum investing outperforms DCA about 67% of the time. I use both methods. In fact, when the Market is very over valued e.g. S&P CAPE over 30 (like today's Market), then I use DCA. When the CAPE is below 30, I use lump sum investing.
We've found studies arguing for both methods but find that DCA is intuitively better because it discourages speculating and helps investors sleep better at night. Most people are saving money every month to build wealth so they have no choice but to DCA ;)
@@Nanalyze so your are investing base on your emotion
@@BillyJakeBulda Not sure what you're talking about
@@Nanalyze statistic says lumpsum is better but you said dca is better because investors sleep better at night...so you are not investing base on numbers but on your emotion
@@BillyJakeBulda DCA reduces market timing risk. That's not emotion, that's a fact. For most investors investing from every paycheck DCA makes sense.
I tend to avoid Stop Losses as well unless I am clearly in a short to medium term trade that I don't mind exiting early preserving some profits. If I am in a long-term investment that I want to keep, then I see no need to have a stop loss. Stop Losses are for trading, not investing in my opinion. Investments don't require stop losses because you have clearly researched them, know why you're invested, and will give the company time to appreciate in value by executing.
That's a great summary, thank you!
When you say Crapto are you referring to shitcoins? Assuming you don't mean BTC?
You, sir, are correct.
I think good stop loss is good for wealth preservation
a 50 day moving average on sp500, allows growth and protects the downsides.
it would have saved you from 2000 and 2008 crashes completely. the same indicator also tells you when to get back in, if you want to lump sum back, but you can always DCA back in, so now you are prepared for stronger growth than in a buy-and-hold scenario
you will never hit 100% highs and lows, but you will never be -30/-50/-70% wiped out and that is good wealth preservation
you lose some costs on more often trades, but that's the price you pay for having protection for the big recessions
You should watch the video as it talks about why stop losses are a bad idea. You don't seem to have digested any of the reasons provided.
I appreciate this advice at this time, I just recently made my first 'stop loss' orderb. I hope it won't be a mistake. I put it on a semiconductor company that I bought back in the 90s when I first opened a Roth IRA, I put the max at the time in it, $2000. I forgot all about it for over 20 years, and just recently saw it's up to $65,000!😮 I'm about 5 years from retirement, so I thought long and hard about it and decided to put a stop order at right around $40,000 (so if it doesn't sell until $30,000, I'll still be making $28,000 on a $2,000 investment.) Not bad for a stupid old bricklayer😂
Nice nest egg you've laid! Another thing you might consider is setting multiple stop losses (if possible with your broker). Try and consider past volatility of the stock and base it on percentages. So if the stock falls XX%, you sell XX%, and then just tier it. Kind of like reverse dollar cost averaging? Just a thought. Also, you never want to have too much money wrapped up in a single stock (expressed as a percentage of total assets). Again, good job growing some nice returns! It's about time in the market, not timing the market.
@@Nanalyze Thank you very much. I'm gonna think about all that!👍👍
I'm not gonna call you a stupid old bricklayer. Don't need those 40-grit hands choking the life out of me. Hell, an old bricklayer probably only needs to use one hand. Joe has given you some great advice, and I agree that you should maybe reconsider the holdings entirely to help preserve and grow what you have.
Stop spreading sound advice and good practices! I like volatility! jkjkjk 😁
Benjamin Graham writes in security analysis that the difference between speculating and investing is that an investor looks at past performance to tell him whether this is a good company to buy, whereas the speculator disregards the past and only focuses on potential future gains. I like your take though! Another golden nugget from Joe!
:) That's a great comment from Mr. Graham, thank you for sharing. Glad you enjoyed the piece as well.
at 3:32 in red: When 95% of prof .... you mean When only 5%??
Correct. Good catch.
why use stop lose if you research well the company
why dont you use stop lose if you see only the chart
You'll need to elaborate a bit more on that
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We love you too
Pigeon entrail exams beats TA, 50% of the time, 100% of the time😂
🕊️< 📈
The relatively low-ish view count is a bit troubling. Money/trade management is a very important subject, and it just goes to show how many people are here to catch a hint at The Next Microsoft, not to learn the boring things that keep you from torching your wife's money.
You are absolutely right! It's a shame this video wasn't more popular because it really contains some good information. We know in advance some of these won't draw a lot of traffic but we think they're important to produce anyway.
best INVESTING way is $costaverage when the market is correcting
DCA always works best when markets fall because you're buying quality assets cheaper.