What % stop loss do you use?

[borat]

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.

 

[nizar]

Re: What %age stop loss do you use?

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.

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.

 

[dj_420]

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.

 

[nizar]

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.

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

 

[Young Gun]

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

 

[matti_pacman]

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.

 

[MichaelD]

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.

 

[tech/a]

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.

 

[borat]

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...

 

[borat]

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

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...

 

[brisvegas]

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

 

[chops_a_must]

100%

Low expectations are the key to happiness.

 

[nizar]

Re: What %age stop loss do you use?

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.

 

[borat]

Re: What %age stop loss do you use?

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.

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

B.

 

[wayneL]

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

 

[brisvegas]

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

 

[wayneL]

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.

 

[Bobby]

Irony here

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

Bob.

 

[wayneL]

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.

 

[coyotte]

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