How much is a good Stoploss system method worth?

[gaussian]

there is no such thing as a perfect stop... because it's self defeating... when a certain method works well, people find out and crowd it and they become vulnerable to stop runs.

Literally, no, but contextually I think so. I agree a perfect stop doesn't exist.

A stop on ATR is alright. I've used them plenty trading futures (though I prefer literally standard deviation). Considering the context - a measure of volatility has changed dramatically so you widen out your stops. If they get hit something crazy is going on. Fixed stops are bad but these flexible stops present useful context in the presence of a change in market regime. If your idea is long, and volatility increase and it blows down short, your idea has been invalidated and the stop is simply acting as a method to remove yourself from a market you no longer understand.

I try to look at a stop loss as your personal risk management team. If you blow your risk limits you are pulled from the market. It is certainly useful to have some kind of stop. What kind? Depends on what you want. Your idea of exiting on the news is good because that will likely lead the rapid change in ATR as the market adjusts.

 

[schizo]

For years I've struggled over knowing what best stoploss method to use.
I have one on Amibroker which I had coded, had it for years, it's a percentage trailing stop system, but it is clunky.
Difficult to code, restricted to Amibroker, a bit complex and time consuming in its application.

I mentor a couple of people and I must say, my entry system I'm very happy with but a good exit system - well, a bit embarrassing really.

So anyhow I created some notes on various styles of stoploss but never answered the question - "What is an ideal system?

So once again was forced to ponder the question and and with a stroke of luck came up with what I think is about the most user friendly practical and workable method.
Can be used on charts or data with minimal coding, it's the old old story, 'If you don't know it is hard, once you know it is easy'.

How many traders are there who struggle with this issue?

Nobody wants to supply their secret sauce entry method, but what about an exit system? Does revealing this create me as a trader issues?
Is there any merit in selling such a method?

OMG!!! You wouldn't even know how many times I've given back all my profits and then some because of undisciplined qua bad exit strategy. Yes, entry is extremely important, but exit is just as crucial. Otherwise, like I already said, you'll just give it all away.

On that note, I would like to add that the exit is just the OPPOSITE of the entry. If entry is considered as LONG, then exit is SHORT. So where you get out is where you should get in if you were to go short. I'm trying to make this as purposefully vague as I can . Hope you understand.

 

[themickey]

OMG!!! You wouldn't even know how many times I've given back all my profits and then some because of undisciplined qua bad exit strategy. Yes, entry is extremely important, but exit is just as crucial. Otherwise, like I already said, you'll just give it all away.

On that note, I would like to add that the exit is just the OPPOSITE of the entry. If entry is considered as LONG, then exit is SHORT. So where you get out is where you should get in if you were to go short. I'm trying to make this as purposefully vague as I can . Hope you understand.

Stocks get added enthusiasm when rising, and added 'closing of purse strings' when falling.
I maintain, much of the reason for a falling stock is not due to selling pressure as such, it's more a case of buyers showing no interest, you can see that with volume drying up. So in effect, bag holders go down with the ship.
But the point I wish to make, once the trend tips over into falling mode, especially like this time of year, kiss your profits goodbye. Without some sort of stop a trader is taken downstream and washed out to sea. The plan to make money is awash.

 

[themickey]

Finding a good stop system is more difficult than traders would like to admit.

 

[themickey]

Imo, going short on an long exit as a matter of course (always in a trade) is not a good idea.
An exit signal should not be seen as a reverse signal.

 

[qlai]

Imo, going short on an long exit as a matter of course (always in a trade) is not a good idea.
An exit signal should not be seen as a short signal.

I agree with this. The only exception is if your entries have very high probabilities, but these are very hard to find.

 

[themickey]

No stop is perfect, won't argue with that, but some are better than others.
Why live in a ghetto when you can live in a mansion - even the mansion has its own issues.

 

[digitalnomad]

- back test trend follow strategy you will find the best stop is no stop lol.. buy more on weakness, 12.5% annual on the qqq plus additional buys on weakness is an unbeatable strategy... not just me saying it... look it up, virtually zero managers can beat this.. (except the very very few HFT type that find some edge that is unattainable by us small retail guys).

This is as certain as it gets when it comes to gambling in markets. Just want to add, don’t bother defining weakness. Just buy when the spare cash is there. It’s basically a momentum index created for you.

In an earlier life I attempted to manage my own long-term portfolio adjusting for volatility, but eventually realized I was barely beating the benchmark, and many months just fell behind. Attempting to predict the volatility, and adjusting position size for it just didn’t work in the long run.

Outside of my short-term trading accounts, and personal home, all my spare cash goes to commercial REIT and large cap Tech portfolios.

 

[dozu888]

Finding a good stop system is more difficult than traders would like to admit.

A good system. Rather.

To you it’s a stop. To the market it’s just a buy or sell. This comes back to the point that an edge is hard to find. With the stop being part of it.

 

[dozu888]

Most trend following systems use the ATR multiplied by multiples of it. The larger the multiple, the larger the stop loss. Hedge funds use those and their exits vary only by the multiples they use. ATR stop losses are wide as it is so, multiples of it would make it even wider. If it is good enough for the hedge funds who do well in the stockmarket, it probably, will work for the retail investors. Of course their time frame is measured in years or until the stop loss is hit, whenever that occurs!

This makes me wonder. Instead of an exit. If atr multiple is used as an entry on the other side what would be the expectancy. Gotta be pretty bad I am guessing?

Wouldn’t trust the hedge guys them most can’t beat the index