Where do you set your stop?

[nizar]

Just keen to know where people set their stops....

Is it just below a moving average or another indicator?
Or is it set as a % of their initial capital?
A specific dollar value?

Thoughts and discussion appreciated

 

[2020hindsight]

Is it possible the manipulators of the market know just how far to let the price fall - to trigger all the stops - then buy up.? And watch it rebound.
By which reckoning you should set your stop pretty low.
Sorry I'm running this conspiracy theory at the moment
_____________
If you take any notice of what I say, you'll be broke too

 

[Realist]

Is it possible the manipulators of the market know just how far to let the price fall - to trigger all the stops - then buy up.? And watch it rebound.
By which reckoning you should set your stop pretty low.
Sorry I'm running this conspiracy theory at the moment

Yes but that has and does happen. Automatically triggered stop losses, and trailing stop losses can lose you more money then save you I reckon.

 

[It's Snake Pliskin]

Yes but that has and does happen. Automatically triggered stop losses, and trailing stop losses can lose you more money then save you I reckon.

Focus on the coins instead of the notes is that it?

 

[Realist]

Focus on the coins instead of the notes is that it?

Nah, just don't let market sentiment dictate your moves..

 

[coyotte]

Just keen to know where people set their stops....

Is it just below a moving average or another indicator?
Or is it set as a % of their initial capital?
A specific dollar value?

Thoughts and discussion appreciated

The last post with graph and explaination in the " CB / Patterns " thread shows one of the methods that I use with success.

Cheers

 

[mildew79]

Investors regularly get taken advantage of in the manner you suggest by setting predicatable or overly defensive (tight) stops.

If you are a trader that doesnt mind time in front of the screen, closely watching momentum indicators can give appropriate warning of short term price movements. There are many books readily available to educate yourself on such indicators these days.

If you are into stops, it is very likely you are also into charting. I always try to place a stop below a significant support level ( significant: meaning at least three touches on your trend line) if I feel the need to use one.

If you are interested in knowing more write me personally. Always got time to help, but not interested in wasting time posting unless you are interested.

 

[It's Snake Pliskin]

Just keen to know where people set their stops....

Is it just below a moving average or another indicator?
Or is it set as a % of their initial capital?
A specific dollar value?

Thoughts and discussion appreciated

Hi Nizar,

Neither of the above.

 

[nizar]

Care to elaborate Snake?
(But If u wanna keep it as your little secret, thats cool)

 

[Milk Man]

I set initial stops just below support (or above resistance ). I use take profits instead of trailing stops. Seem to suit my personality better; quicker gratification. :

 

[MichaelD]

Your stop determines the trade frequency of your plan, and as a general rule the less frequently you trade the more profitable you are (an efficient limit is reached, however, where profitability begins to decay).

I trade two plans.

One is a long term trend following plan. This uses ATR as the basis of the stop. Another valid stop technique for long term trend following would be a breach of a long term moving average.

The other plan is a short term trading plan where the exit is rule-based but somewhat discretionary - exiting when the market tells me the movement has run out of puff.

 

[It's Snake Pliskin]

Care to elaborate Snake?
(But If u wanna keep it as your little secret, thats cool)

Nizar,

Each trade is different based on the stock`s characteristics. Mostly, I use mental stops when in profit.

Initial stops vary from support points to a certain price to lots of leg room to not much leg room at all; all depending on the stock`s character.

 

[tech/a]

Snake

You maybe interested in some figures I found when testing systems,re stop settings.

Regardless of how you set your stop it will fall at a % of initial purchase price.
Agreed using say an ATR stop will give you a wide range of levels from initial purchase price due to volatility.

What I did was look at systems for longterm trading and looked at how many would be stopped out at various % from the initial purchase price.
First I will go through the figures then I will comment on the TRADE OFF
Bear in mind this research was based on my entry approach of "Buying higher".
and would vary for say a retracement type entry.Time period was 8 yrs.

At 20% 9% were stopped
At 15% 14% were stopped
At 10% 23% were stopped
At 8% 27% were stopped
At 5% 42% were stopped
At 3% 54% were stopped.

So when testing it made sence to vary the stop levels to see how it effected all things like Run of losses,Number of trades,smoothness of equity curve,profit,Positive expectancy.

In my case 8-12% worked best Ive chosen 10% for ease of calculation and if an odd amount drop the stop a tick.

To the TRADE OFF.

What happens is that if you choose a wider stop you may not get stopped out often but you will find yourself wallowing in no mans land between stop and entry for extended periods of little movement.20% movement in many stocks can support a range for a year or so. So Opportunity cost comes in to play,as opportunities go by as we wait for action---I hate waiting UNLESS IN PROFIT---the more I'm in the more patient I become!!

At the other end a stop thats too close will have you getting whipped out of trades which do make good within a reasonable range. Sure you can have a re entry criteria but often youll have moved on with no funds to take advantage of the re entry.

So when setting a stop it may be well advised to look at how far this is from the initial purchase price and bear in mind the above.

Yes it does vary but from various "Profitable" systems I have tested and traded it isnt a huge varience.

 

[coyotte]

IMHO
Its just slack analysts rellying on preset STOPS in a TREND or Position Trade ---- their o/k as an insurance measure just incase U get out of touch with the share --but generally price will give ample warning of when to bail out.
Hence the stop level can anywhere , because U should be out BEFORE it is hit.

If your analyist is not verifyed , just buy back in .
Theres allways ample sellers


Cheers

 

[tech/a]

Two totally different things my friend.

An INITIAL STOP and what you are talking of is a TRAILING STOP.

A bad trap for the in experienced is to set a trailing stop as your exit which is what you are suggesting.
Trailing stops are set for protection of capital from OUTLIER moves.

 

[coyotte]

Not suggesting setting a trailing stop at all tech

I am suggesting that most traders would be better served by beefing up their anaylst. and using ANY stop as insurance only .

Cheers

 

[tech/a]

Hmm didnt think anyone was suggesting any different.

I suggest setting a pre entry stop in ALL trades regardless of analysis.

 

[It's Snake Pliskin]

Tech/A,

Snake

You maybe interested in some figures I found when testing systems,re stop settings.

Regardless of how you set your stop it will fall at a % of initial purchase price.
Agreed using say an ATR stop will give you a wide range of levels from initial purchase price due to volatility.

What I did was look at systems for longterm trading and looked at how many would be stopped out at various % from the initial purchase price.
First I will go through the figures then I will comment on the TRADE OFF
Bear in mind this research was based on my entry approach of "Buying higher".
and would vary for say a retracement type entry.Time period was 8 yrs.

At 20% 9% were stopped
At 15% 14% were stopped
At 10% 23% were stopped
At 8% 27% were stopped
At 5% 42% were stopped
At 3% 54% were stopped.

So when testing it made sence to vary the stop levels to see how it effected all things like Run of losses,Number of trades,smoothness of equity curve,profit,Positive expectancy.

In my case 8-12% worked best Ive chosen 10% for ease of calculation and if an odd amount drop the stop a tick.

Good info there. Thanks for posting it.

To the TRADE OFF.

What happens is that if you choose a wider stop you may not get stopped out often but you will find yourself wallowing in no mans land between stop and entry for extended periods of little movement.20% movement in many stocks can support a range for a year or so. So Opportunity cost comes in to play,as opportunities go by as we wait for action---I hate waiting UNLESS IN PROFIT---the more I'm in the more patient I become!!

At the other end a stop thats too close will have you getting whipped out of trades which do make good within a reasonable range. Sure you can have a re entry criteria but often youll have moved on with no funds to take advantage of the re entry.

So when setting a stop it may be well advised to look at how far this is from the initial purchase price and bear in mind the above.

Yes it does vary but from various "Profitable" systems I have tested and traded it isnt a huge varience.

With regard to the part in red, stops don't have to be hit or one doesn`t have to wait for them to be hit. Taking note of opportunity costs, stopping out early using a mental stop isn't a bad thing if one has the psychological fortitude to manage it.

Would it be unexpected to be whipsawed on a countertrend trade using a tight stop? No.
In a momentum trade would having a tight stop be wise? Maybe not. See below:

Bear in mind this research was based on my entry approach of "Buying higher".
and would vary for say a retracement type entry.Time period was 8 yrs.

At 20% 9% were stopped
At 15% 14% were stopped
At 10% 23% were stopped
At 8% 27% were stopped
At 5% 42% were stopped
At 3% 54% were stopped