If 2 people invest the same amount in the same asset at the same time, will their risk be different if they use different risk management strategies?
Say Inventors A and B both buy 1000 shares in company ABC at $10 per share ($10,000 purchase plus brokerage) on the same day.
Investor A is happy to make a 10% profit and then sell the shares straight away. However, if the shares start dropping Investor A is happy to keep holding the shares long term and get the 5% dividend yield on them until the 10% capital gain is achieved.
Investor B, on the other hand, prefers to use a stop loss strategy instead. Investor B puts a stop loss on the shares at 10% below what they were purchased at ($9). If the shares drop to $9 investor B will sell all the shares. However, if the shares start to rise, say to $12, Investor B will raise the stop loss to $10.80 (10% below $12). If the shares keep on rising, Investor B will keep raising the stop loss level accordingly, however if the shares drop the stop loss will not be moved.
Are both Investor A and B taking the same amount of risk, or has one of them changed their risk level due to implementing their risk management strategy?