Quill,
I’m glad to see you’re posting again. But let me play ‘good cop, bad cop’ for a bit.
#1, Everyone’s means, needs, and goals are different, as are their time frames and tolerances for prices moving against them.
#2, Portfolio insurance is very, very expensive.
#3, By and large --and over the long haul-- nothing beats Buy-and-Hope with enough consistency to make “trading” be attractive to most who want to gamble in the equity casinos --err, “invest in the stocks of good companies”.
So, yeah, them long whatever stocks they are right now are probably taking a beating on their holdings. E.g. that POS company, DIS is down again today, trading at 111.39, down about 90% from its year ago high of 197, due to its to putting the radical politics of a Marxist fringe before its fiduciary responsibilities to protect shareholders’ value. (“Get woke. Go broke.”) So, what should them losing money in this current market do (and I’d include me in that group, since I own a lot of bonds, all of which are being repriced down as the market --not its-head-in-the-sand Fed-- raises interest rates)? Sit tight isn’t bad advise, especially, for bond holders, because bonds mature. Stock owners, OTOH, would seem to have two choices, both of them bad. (1) Average down. (2) Learn to trade, as you advise.
Choice Number One is bad, because we’re nowhere near a bottom. Heck, we’re not even (-15%) from last Fall’s highs, and most projections are calling for a (-60%) decline. Choice Number Two is bad as well, because trading is a godawful, high-stress, high-effort thing to do to oneself other than as an occasional recreational diversion. E.g., this morning, I was into something at 7:13:22 PST at 52.74 and out 2 hours, 23 minutes and 22 seconds later at 54.40, with a tidy 3.14% gain. But I wasn’t betting big money. I was just “testing the waters” on an asset-class I’m exploring. But when I saw that I had a windfall profit, I grabbed it, and I’m glad I did, because it’s now trading lower. But it was a good, clean trade.
Explanation: I don’t remember the name of the analyst who introduced the terms ‘Maximum Favorable Excursion’ (MFE) and ‘Maximum Adverse Excursion’ (MAE). But the idea is this. Prices move up and down. You want to hop on when prices are rising, and you want to step off (or step away) when prices are falling. How much of the rise you can capture --how much of the MFE-- and how much of the fall --the MAE-- you can avoid is a measure of your investing/trading efficiency. In the case of the security I traded this morning, the low for the day had been 52.65. The high had been 54.42, creating a diff of 1.77. I got in at 53.74, as I said, and out at 54.40, a diff of 1.66. In other words, the trade was 93.8% efficient, which is probably an all-time, personal best. But the application of that idea is this.
If one is content to be a long-term, Buy-and-Hope investor, then one is working to different standards of efficiency than someone with shorter time frames. You’re a ‘short-timer’. Heck, as Vietnam era soldiers used to joke, “You’re so short, you don’t even cast a shadow”. Nor --it should be added-- should either of be telling anyone how they should or shouldn’t be investing or managing their risks. You think they are squandering their money. I think the same. But the choice is theirs to make.
Arindam