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| Subject: Re: Bear catchers | Date: 2/23/2013 1:11 PM | |
| Author: mungofitch | Number: 241838 of 270533 | |
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Would it yield better results to use a simple MA crossover for example (to avoid big losses) on each security? Or would it perhaps cut gains and decrease overall profit without limiting risk? As far as I know, nobody on this board has found a TA-like individual security stop loss strategy that is both backtestable and passes the backtest. The problem is that markets are squiggly, and often lots of things dip at the same time. You want to sell an individual security not when it dips, as everything might be dipping, but rather when it stops underperforming its peers. Just a general comment on why momentum tends to work but stop losses tend not to work with the type of stock selection methods we use here. If you think about it, a momentum final-sort screen is a stop loss, but the stop is when the loss relative to peers is a certain size, not in absolute terms. One can only answer your question as the answers to the backtests that have been done (market-wide timing tends to work and stop losses tend not to work with the sorts of investments we're doing), and with general speculations as to why that might be. I guess we can't answer absolutely, as there may be many strategies for purchasing and holding under specific circumstances, for which stop losses do add a lot of value. I don't know 'em, all I can say is that they aren't the strategies that are used and tested here. Jim |
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