The Motley Fool Discussion Boards

Previous Page

Investment Analysis Clubs / Liquid Lounge

URL:  http://boards.fool.com/if-the-fundamental-factors-which-lead-you-to-30431260.aspx

Subject:  Re: Gold - Updated TA Date:  12/13/2012  11:35 PM
Author:  MDCigan Number:  41185 of 41316

If the fundamental factors which lead you to believe gold is ultimately going much higher remain intact, why wouldn't you just hold your position regardless of short-term technicals? It's way easier and you won't end up doing stuff that is overly clever which you regret later.

Risk management/minimize drawdowns....

I've been doing this long enough now to realize I get the fundamentals wrong from time to time. Of course, everyone does. Bill Miller wouldn't have had an ignoble end to his investing career if he had been more cognizant that maybe his fundamental analysis was wrong.

So to me taking protective action based on chart patterns/technical indicators is simply a way to protect myself if I turn out very wrong on my fundamental assessment. I sold ATPG at $15 a share while I know many presumably smart people who rode it down to single digits or bankrupcty because they were convinced of their fundamental analysis.

It is philosophical thing. The asymmetry and math of gains and losses (100% gain to make up for 50% loss) led me to the conclusion that in investing/trading avoiding big losses is much more important than big gains. The gains will take care of themself if you just avoid the positions that drop 50%, 70%, 80% from your entry point.
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us