# What % stop loss do you use?



## borat (1 December 2006)

Newbie with more questions...

In establishing a plan to protect my capital and protect my profits what would be a reasonalbe stop loss level?

I have read books that have suggested 2% others 10%... To me the 2% seems very sensitive and the 10% may be going to far so I'm thinking that somewhere in the middle 5-6% on initial entry positions.

Once I have had a gain I could perhaps be a little more flexible with a trailing stop.

Would love to hear your comments and feedback...

B.


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## nizar (1 December 2006)

*Re: What %age stop loss do you use?*



			
				borat said:
			
		

> Newbie with more questions...
> 
> In establishing a plan to protect my capital and protect my profits what would be a reasonalbe stop loss level?
> 
> ...




Borat, the stop must be a placed somewhere that is meaningful ie. you dont want the stop to be hit and the stock still trends upwards. When the stop is hit, the reason you bought the stock is no longer there. ie. if you didnt hold, you wouldnt to take a position.

So for me, what i do is, put the stop just below a support level. If your timeframe is intraday, then look at the intraday support, if longer term, then see the daily.

Its just what i do, not advice, or (definately) not the only way or right way.


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## dj_420 (1 December 2006)

*Re: What %age stop loss do you use?*

the trading range of a share is important also. if you place it within the average days trading range you will be stopped out very easily. trading software platforms will work out avg trading range.


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## nizar (1 December 2006)

*Re: What %age stop loss do you use?*



			
				dj_420 said:
			
		

> the trading range of a share is important also. if you place it within the average days trading range you will be stopped out very easily. trading software platforms will work out avg trading range.




Yeah. For trading longer term trends, ATR based stops and breaks of long term moving averages (eg. 180day) are common stops.


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## Young Gun (1 December 2006)

*Re: What %age stop loss do you use?*

Hi Borat ,

The stop loss should be linked to the value of your portfolio and its diversification. For example you should work out how much it takes stock XYZ to remove 1% off the total value of your portfolio. When you were reffering to 2% I think thats whatever you read was reffering too. 2% on the loss of the total portfolio. For example if your investing around $10,000 in 6 shares. 15 % loss on one share will work out to be around 1 - 2 % loss on your total portfolio. 

Hope this helps a little


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## matti_pacman (1 December 2006)

*Re: What %age stop loss do you use?*

I guess you should consider the beta and the volatility of the stock when deciding the stop loss % as well.


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## MichaelD (1 December 2006)

borat said:
			
		

> In establishing a plan to protect my capital and protect my profits what would be a reasonalbe stop loss level?
> 
> I have read books that have suggested 2% others 10%...



Sounds like you are confusing two separate things;

10% is more likely to be related to where you place the stop on any given stock.

2% is more likely to be related to how much of that stock you buy.


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## tech/a (1 December 2006)

The confusion is in position sizing.

Michael is right.Your confusing 2 things. We should have an archive of FAQ's gets tedious (No offence).

I suggest as a start you look at "Fixed Fractional" position sizing. Just google it.


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## borat (1 December 2006)

tech/a said:
			
		

> The confusion is in position sizing.
> 
> Michael is right.Your confusing 2 things. We should have an archive of FAQ's gets tedious (No offence).
> 
> I suggest as a start you look at "Fixed Fractional" position sizing. Just google it.



I am confused and no offence taken   googling now... Cheers All...


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## borat (1 December 2006)

*Re: What %age stop loss do you use?*



			
				Young Gun said:
			
		

> Hi Borat ,
> 
> The stop loss should be linked to the value of your portfolio and its diversification. For example you should work out how much it takes stock XYZ to remove 1% off the total value of your portfolio. When you were reffering to 2% I think thats whatever you read was reffering too. 2% on the loss of the total portfolio. For example if your investing around $10,000 in 6 shares. 15 % loss on one share will work out to be around 1 - 2 % loss on your total portfolio.
> 
> Hope this helps a little




So only risk 2% of my total portfolio? Wouldn't this be too sensitive still or am I not getting this? Perhaps there are some resources that could be recommended on this subject? I'm kinda confused a bit here...


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## brisvegas (1 December 2006)

stops should never be based on %age of portfolio . thats insane , volatilty of underlying , time frame , risk/reward , size of position etc etc have to be taken into account  . its simple but not that simple . discretionary dynamic thought process required . seriously very few of you here are going to make it following the advice put forward on any of these stock forums . good profitable traders in the main really dont spend time on these forums flexing imaginary egos . i can think of a 1000 cliches here . dont confuse genius with a bull market comes to mind easily . 


.................. bris


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## chops_a_must (1 December 2006)

100%

Low expectations are the key to happiness.


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## nizar (1 December 2006)

*Re: What %age stop loss do you use?*



			
				borat said:
			
		

> So only risk 2% of my total portfolio? Wouldn't this be too sensitive still or am I not getting this? Perhaps there are some resources that could be recommended on this subject? I'm kinda confused a bit here...





YOu are confusing money management and risk management

1. RIsk management: R, which is the risk per trade, should be set to a maximum of 2% of your trading capital. ie. 100k, 2k per trade. I myself prefer 1%. Van Tharp reckons 3% is a maximum.

2. Money management: how many shares to buy? how much of your capital to invest per share. THis should depend on your RISK and your STOP.

But obviously they are different but risk management and money management go hand in hand.

For example. PEN. The other day looked to break out. Ask was 4.6c. The support on the charts was 4.2c. It broke this on volume. All time highs at 4.7c. So your stop is say 1% of 100k. $1000. $1000/(0.004) = 250,000. You can buy 250,000 shares at a cost of $11,500.

The above is just the way i do it. Probably not the right way and definately not the only way.


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## borat (1 December 2006)

*Re: What %age stop loss do you use?*



			
				nizar said:
			
		

> YOu are confusing money management and risk management
> 
> 1. RIsk management: R, which is the risk per trade, should be set to a maximum of 2% of your trading capital. ie. 100k, 2k per trade. I myself prefer 1%. Van Tharp reckons 3% is a maximum.
> 
> ...




Ok, Cheers Nizar... That makes it more clearer! thanks...

B.


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## wayneL (1 December 2006)

brisvegas said:
			
		

> stops should never be based on %age of portfolio . thats insane , volatilty of underlying , time frame , risk/reward , size of position etc etc have to be taken into account  . its simple but not that simple . discretionary dynamic thought process required . *seriously very few of you here are going to make it following the advice put forward on any of these stock forums . good profitable traders in the main really dont spend time on these forums flexing imaginary egos .* i can think of a 1000 cliches here . dont confuse genius with a bull market comes to mind easily .
> 
> 
> .................. bris




Irony here


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## brisvegas (1 December 2006)

wayneL said:
			
		

> Irony here





Irony  ?? i'll stop posting anytime you like . no doubt many will disagree but i doubt there is a poster that has made more sense today . you wont see me posting 2 word entries . no loss to me

moderator ... hmmph


i only post when ive got something to say , what are you saying


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## wayneL (1 December 2006)

brisvegas said:
			
		

> what are you saying




That your post was condescending to the rest of the ASF community who post good information here.

You do make good sense, but try to respect the opinions of others at the same time.

Chill.


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## Bobby (1 December 2006)

wayneL said:
			
		

> Irony here



Wayne lets give Bris some scope here, I feel there is something special about his posts.

Bob.


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## wayneL (1 December 2006)

Bobby said:
			
		

> Wayne lets give Bris some scope here, I feel there is something special about his posts.
> 
> Bob.



Sure Bob,

Just trying to promote some courtesy. Bris's post are good enough to stand on their own merit. No need to disparage everyone else.


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## coyotte (2 December 2006)

borat :

pick up a copy of Guppy's " Share Trading " around $35

he explains it all quite simply


Basically the 2% rule is referring to your total trading bank.
Any one trade should not have a STOP that would be greater than that amount.
So when selecting from a watch list , one of the weeding tools is  " Which stocks  would exceed this amount on the Entry Stop " relative to the position size 

As stated prior in this thread it is also the basis of the  Position Size.
A stock with a lower % Entry Stop would allow you to have a larger position than one with a larger % Entry Stop.


Cheers


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## Bobby (2 December 2006)

wayneL said:
			
		

> Sure Bob,
> 
> Just trying to promote some courtesy. Bris's post are good enough to stand on their own merit. No need to disparage everyone else.




Yes I do agree with your thoughts, Bris 
is saying just what he feels is truth.

Lets look between the lines of whats what at this stage.

Regards Bob.


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## constable (2 December 2006)

brisvegas said:
			
		

> stops should never be based on %age of portfolio . thats insane , volatilty of underlying , time frame , risk/reward , size of position etc etc have to be taken into account  . its simple but not that simple . discretionary dynamic thought process required . seriously very few of you here are going to make it following the advice put forward on any of these stock forums . good profitable traders in the main really dont spend time on these forums flexing imaginary egos . i can think of a 1000 cliches here . dont confuse genius with a bull market comes to mind easily .
> 
> 
> .................. bris



I imagine that the many good traders started out as new guys like me. I have taken so much out of this forum, from learning from others traders experiances, to being alerted to great running stocks , to new programs, to just being able to bounce ideas. Now while I dont purely follow advice given in the forum,  (and im sure no one takes it as gospel ) it does give me something to compare my own learnings and experiance to. And of course its a great to be able to share with other people - something Brisvegas seems a little to important to do - Well done anyway sounds like your a good profitable trader thats great, but do you really feel that strongly about your point that to get it across you have to rubbish everyone else! Dont you feel important enough Brivegas or weren't you loved as a child ? Im confused!


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## nizar (2 December 2006)

constable said:
			
		

> Well done anyway sounds like your a good profitable trader thats great,





He THINKS he is. You can tell from his arrogance.
He hasnt PROVEN it the way that Stevo and Tech have, through trading LIVE.


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## borat (2 December 2006)

coyotte said:
			
		

> pick up a copy of Guppy's " Share Trading " around $35




Will look into in coyotte, cheers... tis a consfusing topic to a beginner but after a few weeks it'll be clear...


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## borat (2 December 2006)

Just want say thanks to you all! This thread has been a great resource and start to a sound investing philosophy... 

Despite the difference of opinion between some of the members I respect all your advice equally, opinions kindly offered and I agree with most of you that nothing is to be taken as gospel. It's totally up to me to understand the methods and practices used then find what works for myself, anything else would be foolish.

Im finding this forum, community a great resource for learning and expanding my knowledge and it'll help me on my way to becoming a better trader if I use the information properly...


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## stevo (2 December 2006)

bris
"dont confuse genius with a bull market comes to mind easily ."

Yes - always in the back of my mind. But let us take what the market gives! A surprising number of people struggle even in a bull market. I believe this is due to a lack of a reasonable strategy and overconfidence in their own natural ability.

In terms of exits, and I am sure it has already been said above somewhere, I base my position size based on where the exits are set. So if I am trading with $100,000 and I only "want" to lose around $1000 on any one trade I will use the exit point to determine the position size. If the close is below the exit point then I will lose around $1000, depending on what price I get out the next day. Obviously if the exit moves up I am likely to get out with less loss than $1000.

Stevo


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## wayneL (2 December 2006)

*Re forums and trading knowlege.
*
I have picked up probably 75% of what I have learned about trading, either directly or indirectly, from forums like ASF.

You find out about things by reading books etc, but you can "learn" a hell of a lot more by discussing.

Even those of us who post up tutorials learn new things in the process... teachers are learners.

Trading is unique in that the sharing of knowledge does not cost you business as it does in normal business (with the exception of some arb strategies). My apprentice won't steal my customers.

The comment that good traders don't go to forums is BS too. While not all good traders post on forums, there are some sages who do.

Of course discretion is required, not all is as it may seem, but isn't it that way with life?

Cheers


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## noobs (2 December 2006)

Brisvegas's comments suggest that he has spent too much time on hot copper!

The ASF share forum is a fantastic opportunity for traders of any level of experience too interact and share knowledge and experiences. I for one have a much better trading system through reading the threads on ASF and I haven't found anything that comes even close to the depth of GOOD information that can be found here.

I do however feel that there are more and more individuals basing there trading decisions solely on forum advice which in my opinion is one of the worst things you can do. I personally use forums only for hints and tips and to confirm a predecided trading decision based on fundamental research and I encourage all other noobies to do the same.

A big heads up thankyou to all the experienced traders who share their wealth of knowledge on ASF (You know who you are)

Lastly I really don't understand his comments "experienced traders don't use forums to flex their imaginary ego's" I mean really have you even read many of the posts on ASF I for one believe this is a load of s^%t. One of the few forums that if this occurs you typically get shot down in flames!


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## Pager (2 December 2006)

I day trade futures, my risk is 1.5% of the account on any 1 trade, I trade several different systems and 7 markets, sometimes I may get 2 signals on 1 market so my risk can go up to 3%.

I trade different time zones and markets so my money is at work 24 hours a day, sometimes trades are overlapping as 1 exchange is near the close and another is just opening so on a few occasions I have had up 9% of my account technically at risk, although if im in a market late in the session in generally means its doing well. 

I would imagine if you don’t trade leveraged products like futures or CFD,s the percentage risked could be higher, around 5% maybe.

Cheers

Pager


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## tech/a (2 December 2006)

Thought Id post up some practical stuff to follow and discuss.
In a few weeks we should have something worthwhile to look back on and hopefully will be a help to those who maybe struggling with the practical application of the principals of Stops and R/R ratio's.

I am not trading any of the examples posted. education ONLY.
Its my intention NOT to close ALL trades at the onetime rather allow trades with wider stops to "Perhaps" run longer price action will be the dictator in all examples.

Ive started with 2 positions and will add when I have time.
You'll note that you can buy more shares with less risk so even with minimum risk we can buy around 3-4 shares with our 10K with Fixed Fractional position sizing.You'll also note that you can alter the parcel sizing by altering the % risked---different figures if you use 3 or 4%.

There becomes an issue when trading with small capital bases as to how to balance maximum number of shares V risk you take on purchase. *This is where most go wrong taking to many shares relative to their risk.*

I hope this exercise will explain a lot to those who take the time to understand many underlying factors other than the stop itself.


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## It's Snake Pliskin (2 December 2006)

brisvegas said:
			
		

> stops should never be based on %age of portfolio . thats insane , volatilty of underlying , time frame , risk/reward , size of position etc etc have to be taken into account  . its simple but not that simple . discretionary dynamic thought process required . seriously very few of you here are going to make it following the advice put forward on any of these stock forums . good profitable traders in the main really dont spend time on these forums flexing imaginary egos . i can think of a 1000 cliches here . dont confuse genius with a bull market comes to mind easily .
> .................. bris




Hi Bris,

I do agree to some extent regarding your comment highlighted in red above. Never, well, that I`m sure is debatable - as you can see many do do it. Insane? I tend to think foolish without any other reasoned method.

I don't agree with your comments about the forum though. 


> very few of you here are going to make it following the advice put forward on any of these stock forums .




Anything on this forum is legally not advice, thus rendering your comment useless.



> good profitable traders in the main really dont spend time on these forums flexing imaginary egos




This shows some degree of arrogance and ignorance. It is impossible to KNOW what all would do. Your comment implies what is not known.

Snake :bounce:


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## Bronte (2 December 2006)

wayneL said:
			
		

> *Re forums and trading knowlege.*
> *I * have picked up probably 75% of what *I * have learned about trading, either directly or indirectly, from forums like ASF.



Aren't you putting yourself on a pedestal wayneL?


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## wayneL (2 December 2006)

Bronte said:
			
		

> Aren't you putting yourself on a pedestal wayneL?




No

I never said it was substantial or good knowledge, just what I know.

I'll let others make that judgement.

Nice try Battman, but no cigar


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## tech/a (2 December 2006)

WHAT!!!!!!!!!!!!!!!
How the F^*CK is he doing that.

*Talk about pedestals----coming from the Original Tri-pod.*

*IDIOTS is the right * word---they just keep rising to greater levels.

Notice the added value to the forum!!!!! Just small minded people out cutting down who "They " percieve as tall poppies.

SAD.

*Anyone interested in Post #30 if not I'll not waste my time GURU's dont come cheap!!*


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## chops_a_must (2 December 2006)

tech/a said:
			
		

> *Anyone interested in Post #30 if not I'll not waste my time GURU's dont come cheap!!*



I am. I'm just not experienced enough to make a comment.

But is it a variation of Van Tharp's method?


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## It's Snake Pliskin (2 December 2006)

*Tech,*



> Thought Id post up some practical stuff to follow and discuss.



Appreciated.



> There becomes an issue when trading with small capital bases as to how to balance maximum number of shares V risk you take on purchase. *This is where most go wrong taking to many shares relative to their risk.*



Yes, good point.

Snake


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## nizar (2 December 2006)

tech/a said:
			
		

> *Anyone interested in Post #30 if not I'll not waste my time GURU's dont come cheap!!*





Yes i am very much interested.


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## wayneL (3 December 2006)

Bronte said:
			
		

> Hehe!
> You have never shown ASF anything wayneL
> No live trading, no property, no house, no car etc



Dear Battman,

Again, I'll let others decide if what I post is useful.

But a perusal of these boards will show that I am quite willing to share whatever knowledge I may have, freely.

Like brisvegas, the irony in what you have posted here is nothing short of breathtaking. In fact you have rather cleverly (not) hoisted yourself by your own petard. LOLOL 

Advise: If you wish to attack someone, it should be from a position of strength, rather than utterly hypocritical weakness.

Cheers

<edit> the above post from Bronte was apparently deleted


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## It's Snake Pliskin (3 December 2006)

wayneL said:
			
		

> Dear Battman,
> 
> Again, I'll let others decide if what I post is useful.
> 
> ...




This WayneL vs Bronte, Bronte, Battman vs WayneL thing is boringggggggggggggggg!

Please stop tainting threads. No offence to either of you but it is booooooringgggggggggggggg


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## Freeballinginawetsuit (3 December 2006)

I'm a Wayne supportor  , his experience and doomsday warnings/bearish yada would be enough to tempt many on ASF to stay out of the market at the most opportunistic times  .

Billygoat bay was nice at Leeman today Wayno, cruised up for the weekend and took my young bloke for a blat on his new quad. Hope you got down the beach for a walk with youre dogs at Gero, nice beach morning today up youre neck of the woods.


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## chops_a_must (3 December 2006)

wayneL said:
			
		

> Again, I'll let others decide if what I post is useful.
> 
> But a perusal of these boards will show that I am quite willing to share whatever knowledge I may have, freely.



He has at various times, corrected me, or given me more information to help understand my position as the case may be. Even in the short time I have been here this has been the case. And that's what it is all about. After all, the more perspectives, the better.


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## emma (3 December 2006)

Could we get back to Tech A's look at stops, fractional position sizing and effect on portfolio pleeeeease.


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## tech/a (3 December 2006)

Take care of *RISK* first and *PROFIT* will come.

Using the example of MCO and IDL most seem to be confused with the standard 2% risked / trade. (This is simply an accepted standard and is by no means hard and fast,traders trading larger capital bases will often use much less).So if we were to take say 2 positions of $5000 each with no consideration for position sizing relative to position of stops the equation would look like this.

MCO 11,900 @ .042c maximum risk $200 or approx 1.5c.Not much room! and no logical placement of a stop.

IDL 18000 @ .275 max risk $200 or again approx 1.5c.

So you can see the dilema with a smaller capital base.Everyone wants to buy as much as they can to gain as much profit as the "Think" they can get in the shortest possible time.

*This is what often happens and Im sure most here can associate with the following.*


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## 2020hindsight (3 December 2006)

can I make a comment and/or ask a question - yet another 2c.  But why is it that everyone who causes trouble around here ( BullMarket, SpaceCadet,  RocketScience etc - ahh yes and Brisvegas) are all "on permanent holidays".  or is this obvious? 

oops I should say "why was it" (past tense) I notice that brisvegas is no longer a member. - has gone the way of bullmarket etc


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## nizar (3 December 2006)

tech/a said:
			
		

> Take care of *RISK* first and *PROFIT* will come.




This is so true.
Yet most newbies fall into this trap ie. not controlling their risk.
A mate of mine got "stopped out" on FML and lost $1,200.
His total capital is $10,000.


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## It's Snake Pliskin (3 December 2006)

nizar said:
			
		

> This is so true.
> Yet most newbies fall into this trap ie. not controlling their risk.
> A mate of mine got "stopped out" on FML and lost $1,200.
> His total capital is $10,000.




A paradox.  
It seems he/she was using a 12% of total capital stop loss


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## tech/a (3 December 2006)

Snake.

Possibly that old favorite the "Pain OH the Pain" stop.


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## Julia (3 December 2006)

2020hindsight said:
			
		

> can I make a comment and/or ask a question - yet another 2c.  But why is it that everyone who causes trouble around here ( BullMarket, SpaceCadet,  RocketScience etc - ahh yes and Brisvegas) are all "on permanent holidays".  or is this obvious?
> 
> oops I should say "why was it" (past tense) I notice that brisvegas is no longer a member. - has gone the way of bullmarket etc




Yes, could we have a comment from a moderator regarding the apparent banning of brisvegas, please.

His posts have been somewhat inflammatory, but to my mind no more so than many others on other threads which have been allowed through.

Unless there is something else which has been deleted, or about which we don't know, banning him seems somewhat extreme, and makes me feel quite uncomfortable.

Julia


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## 2020hindsight (3 December 2006)

Julia said:
			
		

> Yes, could we have a comment from a moderator regarding the apparent banning of brisvegas, please.
> 
> His posts have been somewhat inflammatory, but to my mind no more so than many others on other threads which have been allowed through.
> 
> ...



Julia,
lol - Im not the slightest uncomfortable - 
 I personally dont have much time for chameleons 
http://en.wikipedia.org/wiki/Chameleon


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## nizar (3 December 2006)

It's Snake Pliskin said:
			
		

> A paradox.
> It seems he/she was using a 12% of total capital stop loss




Yep.
A crazy guy.
Had a few big wins and feeling quite invincible now.
He cannot handle 10 losses in a row (obviously) and i feel he wont last long.
This bullmarket would probably keep him afloat for a bit longer though.


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## wayneL (3 December 2006)

Julia said:
			
		

> Yes, could we have a comment from a moderator regarding the apparent banning of brisvegas, please.
> 
> His posts have been somewhat inflammatory, but to my mind no more so than many others on other threads which have been allowed through.
> 
> ...




Julia,

It was behind the scenes stuff that need not be aired in the public forum. 

Cheers


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## borat (4 December 2006)

Could anyone suggest a good reference on Fixed Fractional position sizing? Googling doesn't offer any great resources from my search, probably cause I dont know too much about what I'm looking for...
If anyone could take the time to explain the basics it'd be appreciated, or just point me in the direction of some worthwhile resource you already know about...

Cheers.
B.


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## MichaelD (4 December 2006)

borat said:
			
		

> Could anyone suggest a good reference on Fixed Fractional position sizing?



Search here on this forum. It's a topic we've covered numerous times in several threads.


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## tech/a (4 December 2006)

*The Trading Game by Ryan Jones.*

Is a must for all traders libraries.ISBN 0-471-31698-9

Publishers Wiley.


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## weird (4 December 2006)

Borat, 

http://www.stator-afm.com/money-management-articles.html


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## tech/a (4 December 2006)

No stops hit today in our exercise.


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## tech/a (10 December 2006)

Havent forgotten the exercise on stops here.

Nothing further to report all stops still in position and no trades have been closed out by any of the stops yet.

*I have included the EXIT that will be adopted for the exercise.
It is one of my custom indicators constructed around Parabolic SAR.*


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## tech/a (12 December 2006)

Both still in play IDL did not close below the stop but on the stop.


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