This is how I worked it out. I asked my brokers to send out their telegrams after Wall Street closing time, so they would reach me at 6 P.M. This is about the time I get up – the result of performing in nightclubs for many years. Meanwhile, during the day, the telephone operator is instructed not to let any calls through. In this way everything happens in Wall Street while I am in bed. I am sleeping while they are working, and they cannot reach me nor worry me. My delegate, the stop-loss order, represents me in case something unforeseen happens. – Nicolas Darvas
“I spend my day trying to make myself as happy and relaxed as I can be. If I have positions going against me, I get right out; if they are going for me, I keep them.”
Paul Tudor Jones
A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does damage to the pocketbook and to the soul.”
Do or die: “Drawing is not a dirty word and neither is defeat. Play to win, but take a draw, or even a defeat, and wait for another day. That’s the name of the game.”
A Doubting Thomas: “If you want to be certain of your position, you must begin by doubting it.”
Confidence Game: “in order to win, you must have plenty of confidence, and that’s fine unless it becomes conceit.”
Your Manuscript: “You will need a blank book: plus a pen or pencil. And something just as important: an eraser.”
Defeat: “In many losses, especially among masters, it is the one fatal move that breaks the camel’s back.”
Stroke of Luck: “With luck, students may win a game or two. But with knowledge and work, they may win many games, and even become masters. Stick to your last.”
Ambition: “You have to burn the midnight oil if you want to set the world on fire.”
There’s an old joke about the investor who never used any stop losses. His friend knew his big positions were getting crushed.
Out of concern, the friend asked, “How are you sleeping?”
“Like a baby” he answered.
“Really? You aren’t nervous or upset?”
“I sleep like a baby” he repeated.
“That’s amazing. I’d never be able to sleep through the night with those types of losses.”
“Who said anything about sleeping through the night? I said I slept like a baby: I wake up every two hours, wet myself and cry for 30 minutes before falling back to sleep.”
That’s why risk management is so critical: to save you from sleeping like a baby, and in the long run to save you a lot of money.
There’s a reason flight attendants show you where the emergency exits are before takeoff. The same thinking should apply to investors. Prudent investors have a sell strategy in place beforethey get involved with a stock. Using any of these stop strategies helps keep your emotions out of the process when an investing emergency arises.