Gold Has Outperformed Stocks Over The Past 20 Years

Discussion of the Gold portion of the Permanent Portfolio

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Cortopassi
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by Cortopassi » Wed May 20, 2020 3:17 pm

pmward wrote:
Wed May 20, 2020 10:00 am
I just trail my stop loss and eventually I get stopped out. I never sell at the peak, but I capture the majority of the move, which is good enough.
Well said.

Just curious, do you use sell stops or stop limit orders? And have you ever been burned waking up to bad news or news after the bell that tanked something below your stop the next morning?
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by pmward » Wed May 20, 2020 3:31 pm

Cortopassi wrote:
Wed May 20, 2020 3:17 pm
pmward wrote:
Wed May 20, 2020 10:00 am
I just trail my stop loss and eventually I get stopped out. I never sell at the peak, but I capture the majority of the move, which is good enough.
Well said.

Just curious, do you use sell stops or stop limit orders? And have you ever been burned waking up to bad news or news after the bell that tanked something below your stop the next morning?
I never use stop limit's, just a regular old fashioned stop loss order. Occasionally I'll put in a limit buy order if there is a breakout I am stalking, but I usually only keep limit buys open for a day, never good till cancelled. And yes, of course there are times when things gap below the stop loss and you lose more than you planned. But I've never had anything happen devastatingly so. I mean 1-2% here or there once in awhile, so what? If something gaps below a stop loss, it's still violated the line I was willing to hold it at, and it is better to sell the position for less than the stop than to hold on and pray for a bounce. Let's use that example above again with the person who had 5 1% losses in a row, followed by the 1 10 % winner. What happens if this person instead gaps below his 1% loss and instead tries to hold on to "get back to even"? What if he turns those 1% losses into 20% losses? Then, suddenly, his bad behavior blows his entire account up. Same trades, completely different outcome. The person who set the stop loss, even if he got gapped at the open with a 3% loss on one of the trades, still walks out with a profit on the whole from his 1 winning position. And I intentionally used a 10% winner for a reason. 10% is not exactly a big winner. It's a base hit single. So one single made up for more than 5 strikeouts and actually turned a good profit on the whole. Now imagine if that winner is a double, a triple, a home run, or a grand slam? By being prudent and cutting his losses short, he allowed himself the ability to fight another day, and eventually he catches the big one.
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Cortopassi
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by Cortopassi » Wed May 20, 2020 3:59 pm

I think I may have mentioned it in a post over the past years -- at one point I assessed all my past trading very methodically, and made one change -- I assumed I sold my winners at whatever % gain I originally did, but changed all my losses to 8% max (assuming I had stop loss orders, which I almost never did).

The difference was astounding.

I never took it to the point of seeing what would have happened if I put trailing stops on the winners and let them run, but I can only imagine that right now I would not need to be in a cube still relying on working for my income...

I could probably do a heck of a lot better trading nowadays with a few of these rules, but trading for many years just sucked up too much of my life. Looking back, I hated it. It was stressful to me, even when I did make money.
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by pmward » Wed May 20, 2020 4:08 pm

Cortopassi wrote:
Wed May 20, 2020 3:59 pm
I could probably do a heck of a lot better trading nowadays with a few of these rules, but trading for many years just sucked up too much of my life. Looking back, I hated it. It was stressful to me, even when I did make money.
This was a large part of why I kind of took a break from trading entirely and sat in a GB for a good year and some change. But the bug did come back. Probably helps that I had success with it in the past. But I trade differently now than I did back then in some key ways. I'm looking for longer trades now, and I rarely trade individual stocks these days. By sticking mostly to ETF's it greatly reduces the amount of time I need to spend searching for ideas. But yeah, you've experienced exactly what I meant when I said that risk management is more important than trading methodology. I never push the buy button without first knowing where I will sell if I'm wrong.
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by vnatale » Wed May 20, 2020 7:08 pm

pmward wrote:
Wed May 20, 2020 3:31 pm
. And I intentionally used a 10% winner for a reason. 10% is not exactly a big winner. It's a base hit single. So one single made up for more than 5 strikeouts and actually turned a good profit on the whole. Now imagine if that winner is a double, a triple, a home run, or a grand slam?
Of course, I'm picking up on all the baseball content!

I know you are a baseball fan and, remembering correcting that your team is the Tigers?

Vinny
"I only regret that I have but one lap to give to my cats."
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by pmward » Wed May 20, 2020 7:09 pm

vnatale wrote:
Wed May 20, 2020 7:08 pm
pmward wrote:
Wed May 20, 2020 3:31 pm
. And I intentionally used a 10% winner for a reason. 10% is not exactly a big winner. It's a base hit single. So one single made up for more than 5 strikeouts and actually turned a good profit on the whole. Now imagine if that winner is a double, a triple, a home run, or a grand slam?
Of course, I'm picking up on all the baseball content!

I know you are a baseball fan and, remembering correcting that your team is the Tigers?

Vinny
You got it!
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by Kriegsspiel » Wed May 20, 2020 9:42 pm

I've been to a couple games, the Tiger's stadium is fantastic. I liked downtown Detroit. When a couple friends caught you drinking in the afternoon and invited you to a baseball game, you could easily accepi. Good times.
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by mathjak107 » Thu May 21, 2020 3:36 am

the problem with stop losses is they can execute way below your planned price ... the popular etf DVY is a great example of what can happen when an etf goes wrong ...in the flash crash we had DVY executed at down 35% in a heart beat while the assets it held were only down 5% ..

it took a few minutes to realign but there was severe damage done to those who had stop losses and stop limits .

stop limits have their own problems , today a stock can fall so fast your order never executes even a penny below and you are now caught in the down blast.

once again , meh ...it works until it doesn't
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by pmward » Thu May 21, 2020 11:39 am

Kriegsspiel wrote:
Wed May 20, 2020 9:42 pm
I've been to a couple games, the Tiger's stadium is fantastic. I liked downtown Detroit. When a couple friends caught you drinking in the afternoon and invited you to a baseball game, you could easily accepi. Good times.
Yeah, Tigers games really have a great vibe, especially the evening games. I miss going to them, but I don't miss the cold!
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by pmward » Thu May 21, 2020 11:44 am

mathjak107 wrote:
Thu May 21, 2020 3:36 am
the problem with stop losses is they can execute way below your planned price ... the popular etf DVY is a great example of what can happen when an etf goes wrong ...in the flash crash we had DVY executed at down 35% in a heart beat while the assets it held were only down 5% ..

it took a few minutes to realign but there was severe damage done to those who had stop losses and stop limits .

stop limits have their own problems , today a stock can fall so fast your order never executes even a penny below and you are now caught in the down blast.

once again , meh ...it works until it doesn't
If a position falls below the target I have for my stop loss, it means the reason I bought it has changed and I need to get out. Taking a little extra loss on a gap is chump change compared to foolishly trying to hold and sell on a bounce that never comes. I would say what happened to you was pretty exceptional. Not only that, but if someone has a position large enough that a single gap loss could inflict devastating pain on their entire portfolio then they are doing it wrong. Position sizing is a HUGE part of risk management. None of my active positions are sized large enough to make that big of a dent. I always know how much risk I have exposed on all my positions. Your 35% loss on a 10% position would be only a 3.5% loss to the portfolio as a whole. Something that is still very easy to recover from. Stop losses are not "risk management" in and of themselves, they are one part of a whole "risk management" plan. If you don't have a whole plan in place, and you're doing stupid shit elsewhere, then yes stop losses can hurt you on the whole. But with a full comprehensive risk management plan in place, on the whole stop losses will help you not hurt you.
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by Kbg » Tue May 26, 2020 6:32 pm

Here is a tip which pretty much works in all times and all places as a general rule...not as a specific, but as a general rule. Obviously any individual trade will do what it is going to do.

If you are a stop loss kind of person, set it in your head/on a piece of paper, do not enter it to trigger the sell. Sell the next day market on open regardless if it is above or below your stop.
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by pmward » Wed May 27, 2020 11:15 am

Kbg wrote:
Tue May 26, 2020 6:32 pm
Here is a tip which pretty much works in all times and all places as a general rule...not as a specific, but as a general rule. Obviously any individual trade will do what it is going to do.

If you are a stop loss kind of person, set it in your head/on a piece of paper, do not enter it to trigger the sell. Sell the next day market on open regardless if it is above or below your stop.
This is good if someone will actually follow through. Most people fail at this kind of behavior though and wind up holding on and taking a much larger loss than if they just set the automatic stop. There is benefit in removing the emotion and having the sale go automatically. But, when doing this I do leave a buffer, I don't set my stop loss right at a support level so I don't get shaken out in a fake breakdown. I set my stop loss at a point where if we get below that level it changes my thesis and means there is no reason to hold.
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