Howdy folks,

First off a little disclaimer as to my trading style. I'm not a buy and hold person by any means. I swing trade stocks for holds of a few weeks, but I apply the following to my long term retirement accounts too:

The single most important thing that I have learned is always enter a trade with a stop loss. Mental stop losses don't count, if it's not in the system queued up right after you enter the position, then it's worthless. Why take that psychological and monetary damage when you don't have to? Most probably it's because you're afraid that you'll miss the money when it starts moving your way again. Count the number of times that you've closed out a winning trade that was at one point down 60 or 70%. Hasn't happened to me much back when I was buying & holding (the bag!). You have to take the emotion out of trading, and see the market as pure price action (see tom biro's point about irrationality).

Another side to this is the mentality that you have to get back at the market for the loss you just took. There's no reason why you have to make money off that same position that you had just closed out in order to 'get even'. You will have until the end of your life to trade the markets. More opportunities will come, so get out early and save yourself the red in your portfolio.

This is how I approach my stop losses:

1. My stops start off with me not losing more than 2% of my total account value. If I'm trading a 100k account, that means I can not afford to lose more than $2k per trade (let's call this my MaxLossPerTrade).

2. You can figure out the position size for a trade with that amount of risk by calculating the average range of the stock in the last 10 days (usually this is the 'Average True Range' indicator on your charting programs). Let's say stock ABC (currently at $30.00) has an ATR of $1.50. That means you can afford to to buy 1300 shares (MaxLossPerTrade / ATR = 1333.33 ). At this point, re-evaluate the risk/reward of this stock. Are you expecting it to go up much more than the potential loss you will have? If not, don't bother, move onto a better prospect. There's nothing to say you need to trade every day.

3. My stop loss on entry of that trade will then be the price I entered at, minus the average range of the stock. I put in a GoodUntilCancelled (GTC) order with my broker to sell all my shares if the price trades at or below my stop loss.

4. I move this stop loss up as the stock goes up. With each new high of the day, move the stop loss up to the High - Original Average Range.

Never move or cancel a stop loss after you have entered it. Your mind will play games with you as the stock comes down to flirt with the stop loss. If you get stopped out, big deal, it's only 2% of your account. This will save you time and time again. It will let you keep your winners running, and keep your losers from staying around.

Merrill Lynch Under Attack as Giving Out Tainted Advice - not sure if this is something we want to be posting here but does point out to me the need for efforts like MetaPie.

I think Peter Lynch has some good ideas but as I said before I'm not a technician. Given that, though, I would look more at the Buffett/Munger buy what you can understand model. There are way too many variables and irrational price movements for a non-professional investor to really get a complete yet timely understanding of even a single stock but if one is going to invest on a story/fundamental basis, one best do as much as possible to understand the story. My mother never really understood this and preferred to invest on the recommendation of a friend strategy. So now I have some pretty paper like a Coal Technology Corporation certificate because my mother read that shale was hot (this is back in the '70s) and found a way in. Ha! Contrast this with my position in VXGN where I actually know some of the principles (Buffet says to love the management) and keep up with the business side of things. Still, because of the aforementioned variables and irrationalities, my VXGN dream may never come true.

Like Brother Price, my biggest position is due to employment, although I no longer bow down before he who is Scott. I have been following the market for just about 30 years now but I doubt I'm more of an expert than anyone else. I rarely have a problem contributing an opinion regardless. From an investing perspective I have mostly focused the last couple of years on building a position in Vaxgen, I'll be up front about that, and am hopful that when the stock pops in Q4 I will have a nice tidy sum which I can expend on the knowledge I will gain from this gang.

hello fellow pie eaters! looks like i’m lucky number 4 for the meta pie. first, a little background: i’m a junior in college at the university of iowa, majoring in computer science and economics. and just like tom, i don’t like using caps when i type.

i’ve been involved in the stock market for six years, but i’m definitely not a trader nor a speculator. all but a few of my stock picks have been based on what i think of a company and its future. this means i usually stick to the companies that i know a little about, which is mostly tech companies (being a comp sci major and all…).

so i got into the market before the boom, which was a good and a bad time to start. good because i made a lot of money. bad because for a few years i didn’t know the market could go down. this naïve trading led me to my best and worst trades. the best: getting in on the redhat ipo (sold near high). the worst: buying qualcomm at 170 (still own it). i don’t own enough money to have a real conflict of interest, but if i’m talking about a security i’ll be sure to disclose any positions i might have.

thanks ~hk for giving us a place to meet. i think this community has a lot of potential and i hope it grows, because i have a lot to learn...