Stop point vs. time hold

ChaoSI · 8 April 2011

so i have a share which i bought based on the idea that the price *should* go up following them doing a takeover of another company in mid May.
However the Sp has currently fallen to my stop point.

so, my question is, do you sell because the sp has hit the stop point, or do you ignore it because you were intending to hold the stock until the takeover occurred anyway ?

not advice i'm looking for. just thoughts and opinions.

So_Cynical · 8 April 2011

Not much point having a 'stop point' if your going to ignore it, personally i don't use em.

skyQuake · 8 April 2011

Hard to set stops if you're more of a fundamental investor;

If you're trading more actively then stops are good. Remember you can always buy back later.

skc · 8 April 2011

ChaoSI said:
so i have a share which i bought based on the idea that the price *should* go up following them doing a takeover of another company in mid May.
However the Sp has currently fallen to my stop point.

so, my question is, do you sell because the sp has hit the stop point, or do you ignore it because you were intending to hold the stock until the takeover occurred anyway ?

not advice i'm looking for. just thoughts and opinions.

- The acquiring company's share price usually falls, while the target company share price usually rises. But at the end of the day it depends on the price being paid for the acquisition. You have mentioned something similar on the CPU thread - that acquisition is quite small and really doesn't change the game that much one way or another for CPU.

- You need to have a trading / investing strategy that is 'internally congruent'. You can buy a stock for a range of reasons... but you need to sell based on that same reason being proven/dis-proved. For example, I bought XXX based on that it has rising profits and the valuation is cheap. I will thus sell if the profit is not rising as I assumed (I might sell at a loss), or that valuation is becoming expensive (I might sell there at a profit). Buying a stock based on takeover, but having a price based stop loss makes very little sense together.

- For whatever reason you decided to enter the stock, you also need to make sure that such reason is 'verifiable'... In your example, what evidence would you need to show that the acquisition has worked? Are you waiting to see increased earning? Or is the only way you know you are right is for the share price to go up? How do you then 'isolate' the effect of the overall market sentiment and other maxro factors vs effect of the acquistion?

tech/a · 8 April 2011

just thoughts and opinions.

A very wise "Chartist" once said.

It doesn't matter that your wrong
It matters how long you stay wrong!

ChaoSI · 8 April 2011

skc said:
- The acquiring company's share price usually falls, while the target company share price usually rises. But at the end of the day it depends on the price being paid for the acquisition. You have mentioned something similar on the CPU thread - that acquisition is quite small and really doesn't change the game that much one way or another for CPU.

- You need to have a trading / investing strategy that is 'internally congruent'. You can buy a stock for a range of reasons... but you need to sell based on that same reason being proven/dis-proved. For example, I bought XXX based on that it has rising profits and the valuation is cheap. I will thus sell if the profit is not rising as I assumed (I might sell at a loss), or that valuation is becoming expensive (I might sell there at a profit). Buying a stock based on takeover, but having a price based stop loss makes very little sense together.

- For whatever reason you decided to enter the stock, you also need to make sure that such reason is 'verifiable'... In your example, what evidence would you need to show that the acquisition has worked? Are you waiting to see increased earning? Or is the only way you know you are right is for the share price to go up? How do you then 'isolate' the effect of the overall market sentiment and other maxro factors vs effect of the acquistion?

wow..... :S i know all this stuff makes sense... i just find the sheer scope of the amount of research you guys do absolutely daunting... no wonder most people fail when they go for the stockmarket half arsed..
and yeah this is about CPU... just my noob brain going "oh... takeover... that must mean something.... surely..."
where do you go about looking up earnings ? do you literally jsut look up the company stats and holdings etc wade through all of their info?
as for isolating... i guess for me i'm a simple man.. if it goes up i'll be happy and i'm sure many of the vets here are going to shake their heads at me

it's a simple idea but i like the "internally congruent" reasoning.... i will endeavour to look more into that,

tech/a said:
A very wise "Chartist" once said.

It doesn't matter that your wrong
It matters how long you stay wrong!

very true.... i likey

So_Cynical · 8 April 2011

ChaoSI said:
wow..... :S i know all this stuff makes sense... i just find the sheer scope of the amount of research you guys do absolutely daunting... no wonder most people fail when they go for the stockmarket half arsed..
and yeah this is about CPU... just my noob brain going "oh... takeover... that must mean something.... surely..."
where do you go about looking up earnings ? do you literally jsut look up the company stats and holdings etc wade through all of their info?
as for isolating... i guess for me i'm a simple man.. if it goes up i'll be happy and i'm sure many of the vets here are going to shake their heads at me

LOL at least you have a sense of humour.

I have to assume you saw the CPU take over announcement the other day, also have to assume you didn't read it and or didn't take notice of the target valuation of 30 million Euros? Because then its pretty easy to imagine 30 million Euros in one hand and CPU's market cap of 5.2 Billion in the other hand and then come to the conclusion the takeover is a next to nothing event.

ChaoSI · 9 April 2011

So_Cynical said:
LOL at least you have a sense of humour.

I have to assume you saw the CPU take over announcement the other day, also have to assume you didn't read it and or didn't take notice of the target valuation of 30 million Euros? Because then its pretty easy to imagine 30 million Euros in one hand and CPU's market cap of 5.2 Billion in the other hand and then come to the conclusion the takeover is a next to nothing event.

lol yeah well if i keep putting money down for reasons like this humour will probably be the only thiing i have left
i did read the 30mil
but yeah having looked at the company stats.. and the market cap.... yeah.... wow... fool move lol

skc · 10 April 2011

ChaoSI said:
wow..... :S i know all this stuff makes sense... i just find the sheer scope of the amount of research you guys do absolutely daunting... no wonder most people fail when they go for the stockmarket half arsed..
and yeah this is about CPU... just my noob brain going "oh... takeover... that must mean something.... surely..."
where do you go about looking up earnings ? do you literally jsut look up the company stats and holdings etc wade through all of their info?
as for isolating... i guess for me i'm a simple man.. if it goes up i'll be happy and i'm sure many of the vets here are going to shake their heads at me

it's a simple idea but i like the "internally congruent" reasoning.... i will endeavour to look more into that,

I am a full time trader so I probably have a bit more time to understand various companies than part timers. To build your knowledge about the market you need increase exposure over time. To build your knowledge about individual companies there is no substitute for research. Pick a small company that's simple and research that, rather than complicated businesses like banks, insurances and even CPU. I bet you most people can't tell you immediately what are the revenue and cost drivers of CPU off the top of their head, but I bet you can do that for JB HiFi...

On isolating... The point was that your reason should be verifiable. The benefit of CPU taking over a company less than 1% of its size was inherently 'unverifiable'. So find a simple obvious reason, and you will find simple verificatons.

And this leads to the simplest of all reasons - price action. You can always look at a company as a line on a chart and make your buy/sell decisions there. In this approach, you still need to remain 'internally congruent'. You buy because you think support at $20 will hold, you sell when $20 no longer holds. Simple...and very effective if done well.

tothemax6 · 10 April 2011

ChaoSI said:
so i have a share which i bought based on the idea that the price *should* go up following them doing a takeover of another company in mid May.
However the Sp has currently fallen to my stop point.

so, my question is, do you sell because the sp has hit the stop point, or do you ignore it because you were intending to hold the stock until the takeover occurred anyway ?

not advice i'm looking for. just thoughts and opinions.

Stops are more for charting, tech analyzing, margin using, short term traders. It is necessary to use a stop in this case, as a small move in the sp means a big gain or loss. The trader makes his bet - its about to go up. If he is wrong, the stop is triggered and he thinks of another trade.
A fundamental investor is thinking more about the share itself, than the sp. That is to say, he is trying to determine the worth of the share by determining the worth of the company. For this reason, his buy or sell actions will actually be in the opposite direction - if the sp drops, he will probably buy more. If the sp goes up, but he sees the companies fundamentals deteriorate, he will probably sell.

Stop point vs. time hold

ChaoSI

So_Cynical

The Contrarian Averager

skyQuake

skc

Goldmember

tech/a

No Ordinary Duck

ChaoSI

So_Cynical

The Contrarian Averager

ChaoSI

skc

Goldmember

tothemax6

Similar threads

Stop point vs. time hold

The Contrarian Averager

Goldmember

No Ordinary Duck

The Contrarian Averager

Goldmember

Similar threads

Privacy & Transparency

Privacy & Transparency