This is the results of 400,000 tested trades--- like it or not, it is the facts-- don't believe it? If you got the data, run the test yourself---so you either listen to quantitative facts or continue to go by "feelings" and old wives tales about the market.
Stops are an integral part of most stock trader’s arsenal. Many consider it foolhardy and naïve to trade without a fixed stop in place prior to entering a position.
As with most of the conventional market wisdom, these feelings do not hold up to vigorous testing. We have run 100’s of tests have that have proven fixed stops actually hurt the performance of any trading system.
One example took all shares trading above their 200 day Simple Moving Average closing at its 10 day low. The trade would be exited on a close above its 10 day Simple Moving Average or when a stop is hit at a variety of percentage points below the entry.
Out of nearly 400,000 tested trades, stops hurt the performance of the system. In fact, the tighter the stop, the worse the performance. Even stops as wide as 50% away from the entry dampened the systems returns. Of course there are psychological benefits to using fixed stops but at the expense of profit. Dropping the fixed stops is a sure way to improve the results of your trading system.
