Article Stop Loss – Q&A

[T2W Bot]

I get more questions about stop losses than about any other subject. Clearly this strategy causes traders a lot of pain and confusion. Some of it stems from the schizoid nature of our modern markets. But most of it reflects an underlying weakness in trade management skills.
What takes place at the end of a trade usually reflects decisions made at the beginning. In other words, the best entries usually lead to the most profitable exits. This is the most urgent wisdom I can give when it comes to stop-loss placement.
We can spend hours deciding whether a stock is a good buy or a good sell, but this emphasis is often misplaced. Over time, carefully chosen exits are more important than great entries. You don’t believe me? Just ask all those folks who bought tech stocks in the late 1990s.
I’ve compiled a question-and-answer session that addresses the most important elements of stop-loss strategy.
Q – Where do I place my stop loss when shorting a stock that gaps down?
A...

Continue reading...

 

[Sharky]

The third article in Alan's Q&A series in which he addresses the most important elements of stop-loss strategy.

 

[Grey1]

Nothing new in this article . I was hoping he would discuss intelligent ways of entering a trade to reduce the need for wide stop loss but he did not .

he never discussed

1) Would you martingale trade your pos size if the price moves toward the stop or Antimartingle , or none ? ( would you add to your position to average down as the price moved toward the stop or scale down , or none )

2) What are the intelligent methods in setting a dynamic stop( move your stop up/down depending on facotrs like ATR changing , ....) Also is a fixed stop ( not open to negotiation) better than a dynamic one and why ?

3) Is it better to have a measure of price SD for stop loss or ATR ( a well researched analysis )

4) Would it help traders in setting stop loss if they had a fully hedged position ( how can it be done )

5) what is the best combination of a volatility based stop ( technical ) and pure money management stop ( fixed fraction , Optimal F , fixed size ..kelly ) .

Perhaps I have to write some thing myself

 

[TheBramble]

Perhaps I have to write some thing myself

Good man. I was hoping I wasn't going to have to be the one to suggest it.

Seriously, a paper/article covering those points you mention at the level of detail that you are capable of managing would be a really useful read. Go on. Be a sport....

 

[fxmarkets]

Nothing new in this article . I was hoping he would discuss intelligent ways of entering a trade to reduce the need for wide stop loss but he did not .

I havent read his topic, just caught this, I dont think he/anyone should release detailed information on this subject. en masse.

Why would anyone want to do this? or facilitate this handout, isn't that irresponsible,which could also potentially/very likely result in slowing growth of an individual?

 

[TraderPattern]

Well done, Farley.

It is good to see an article with a well-articulated agreement with my personal philosophies on the highly crucial issue of the analysis of the stop loss phenomenon. This article will be good for newbies, to help stop them from losing big. This article, however, does not add anything substantial for those successful traders amongst us.

Because the article contains some excellent commonsense to help those of you who are less successful as traders, it was evidently extremely pleasurable to award it a mark of 10/10.

 

[RUDEBOY]

I like this article, it's a good one. What kind of trader mostly frequents this site?

A) The professional, trading for a corp?

B) The home trader, doing it for themselves?

C) The worker, trading on the side for themselves?

I would say it was C. I would also say that catargory C have less time to manage trades. What is Mr C. thinking when he places his vital stop? Has Mr C. chosen the correct time frame to trade?

 

[FXSCALPER2]

What I find fascinating about these gurus is how they become gurus. This fella says:

"You only have two choices if you're positioned before a stop-gunning exercise. First, keep the stop-loss outside commonly targeted price levels. This is tough to do because it adds a lot of risk to the trade".

No it doesn't. Has he never thought of adjusting your leverage (bet size)? Bless!

 

[dbphoenix]

I see RudeBoy was banned again. To whatever moderator is responsible, thank you.

 

[Charlottesville]

Thank you that was worth about...

$20,000 to me. Very concise and clearly written.

 

[pchang]

Re: Stop Loss - Q&A

$10,000 to me. Not really that brave for more future loss. Insightful article. thanks.

 

[blackwhite]

Stop Orders outside RTH - CME/Globex

What about stop orders outside regular trading hours on CME/Globex? I have had problems with them not triggering and was able to find this in my brokers files: "Stop orders are not natively supported on CME/Globex. Interactive Brokers provides customers with simulated stop orders. Simulated stop orders will only trigger during regular trading hours unless configured by the customer." Does a stop-limit order have to be used in this case?