snappyfrog
728 posts
msg #161165
- Ignore snappyfrog |
6/27/2024 9:20:03 AM
Curious what everyone's take is on stop losses. I set stop losses at 3% - 15% depending on the price of the stock. If a stock moves in my favor, I change to a trailing stop loss.
"Several eminent traders have, over the years, tested different stop loss strategies and came to the conclusion
that stop loss rarely works in your favor. It is rare to find a winning stop loss — a stop loss that does what it is believed
to do, which is to prevent catastrophic losses. What usually happens is that the price hits your stop loss and after a
while goes back in the direction you predicted. This can be very frustrating, as it seems to limit your strategy’s profitability,
rather than limiting losses.
This sentiment has been echoed by top traders, such as Larry Connors, Curtis Faith, and DE Shaw. For example, after
running hundreds of tests to find the optimal stop loss levels, Larry Connors came to the conclusion that optimal stop
levels do not exist. Instead, he found that stop loss hurts performance. Curtis Faith of the Richard Dennis Turtle experiment
and DE Shaw also came to a similar conclusion. Curtis found that the best performance is without a stop loss."
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xarlor
585 posts
msg #161166
- Ignore xarlor |
6/27/2024 3:47:52 PM
In the end, it depends on your profit target strategy. The only way to find out if a stop-loss is beneficial is data.
For example, I had a recent strategy where upon opening a position, I set an OCO order for 5% profit or 5% trailing stop. After doing about 150 live trades, I analyzed the data and saw that over half of my trades were getting stopped out for a -2.0% loss. This means over half the time, these stocks rose to a peak of 3.0% profit and eventually dropped 5% to hit the trailing stop loss.
So I adjusted my OCO to 2% profit or 5% stop loss. Although I was only realizing 2% max profit, it increased my winning percentage to 63% and made this particular strategy profitable:
Win percentage: 63%
Loss percentage: 37%
Average winner: 2.32% (thanks to gappers)
Average loser: -3.91%
But again, it depends on your strategy. I found this article also profitable for buy-and-hold strategies. It recommends setting a hard 8% stop loss and profit taking at 20%. There are nuances to the rules, but it is well thought out and explained.
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snappyfrog
728 posts
msg #161167
- Ignore snappyfrog |
6/27/2024 6:45:09 PM
xarlor, good read on that link. Thanks
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snappyfrog
728 posts
msg #161168
- Ignore snappyfrog |
6/27/2024 6:59:23 PM
I look at possible runs for risk / reward, but I don't set take profit targets. I use trailing stop losses to try to
ride the run as far as possible. Too many times in the past I got out at targets only to see price continue to run up.
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miketranz
966 posts
msg #161169
- Ignore miketranz |
6/28/2024 10:56:19 AM
I agree it depends on your basic trading style,holding time,mental strength.I've also read positive data on "no stops".I believe it may possibly work,but all you need is that one bad trade to wipe out your account.Best,Miketranz....
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snappyfrog
728 posts
msg #161171
- Ignore snappyfrog |
6/28/2024 7:27:53 PM
Mike, I totally agree. I am not comfortable not having some type of stop loss.
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