A pre-defined process works best
As a rough rule of thumb, a “statistically significant move” and/or an event that wasn’t forecast would result in exiting rather than adding to the position.
Chart Below: Distribution of maximum drawdowns of the S&P 500 stocks in 2015: Beyond 20% the relationship becomes non-linear – setting loss levels reduces the risk of owning (a lot of) a stock where this happens to you.
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Equities
The Indian companies dominating emerging market returns
Sara Allen,
Livewire Markets
Equities
No rule of law in emerging markets
Sara Allen,
Livewire Markets