billyspradling
13 posts
msg #71539
- Ignore billyspradling |
2/19/2009 12:49:53 PM
I am trying to find some code that will allow me to put a stop lock on a stock
my problem being-- if i put the stop lock at 2% the volitality of the stock, during the normal ups and downs of the day might make it sell even if the stock in going up. if i put the stop lock at 5%, the loss is to great.
i think what i am tyrying to do is get above the normal clutter-or ups and downs of the stock if you will, yet not make it so high that the loss is to great. im pretty new to this, so any help you can give will greatly be appreciated!!
THANKS
BILL
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decipherlinda
133 posts
msg #71560
- Ignore decipherlinda |
2/19/2009 7:12:09 PM
This is the dilemma we all face. The only reference I've seen to an absolute stop loss is from Investor's Business Daily where 7% is taught.
If you're looking for a daily stop loss, you might consider calculating the average of the close from yesterday to the close of today / close of yesterday for the last 20 days or so. I'd also suggest doing this for UP days only. That's more conservitive than days where the stock's dropping like a rock. Stocks drop fast, often with higher daily ranges.
In the same way, if you're looking to stay in the stock for a longer term and don't want to be whipsawed out when it takes a several day or more correction, look at past corrections and calcuate how low corrections for that stock generally take it. Take the average or the worst case (or more), depending on how risk averse you are.
Once you own a stock for a while and have good paper earnings, you can set the stop loss higher than your original stop loss (7% becomes, say 15%) because you can now afford to withstand corrections to see if the stock resumes its uptrend. This is a lousy market to learn in. It wants to kill you financially.
Remember too that low priced stocks are much more volatile price-wise than higher priced stocks. A 10% increase or drop on a $1.50 stock isn't all that unusual.
There is no one answer to the question you asked. It's judgment, risk aversion/acceptance, the market trend, your personal style, the cost of the stock, and whatever technique you've selected. It's individual. If you can't afford to lose the amount of a reasonable stop loss (given the stock's historical volatility), stockpile your money for a bull market and do lots of virtual trading.
I think most of us expect to buy losing trades more often than winning ones. The well-known trick is to sell the loses right away and hang on to the winners.
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luc1grunt
622 posts
msg #71586
- Ignore luc1grunt |
2/20/2009 9:52:42 AM
possible calculation is to use 2x the ATR for the stock giving it room to breath. Change the stop based on changing volatility. Calculate position sizing based on that stop.
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Walid
130 posts
msg #71601
- Ignore Walid |
2/20/2009 11:26:34 AM
In my opinion, there is no one stop shopping for a stop loss, not 2%, 7% or 15%. Stop loss means simply that the market went against your decision that was based on your technical analysis. For each strategy you use, there is a point on the chart that indicates that the market will not respect your analysis - and this by no means mean that your analysis was wrong. You need to find this point on the chart and mark it. Again, it differs based on your strategy, for instance if you are using Japanese Candlestick patterns such as Hammer, your stop is one or two ticks below the Hammer. Some less aggressive trader decide to wait for a pullback to enter so they are as close to the stop as possible. When the trade goes in your favor, change the stop to breakeven and you got a free trade on your hand. Manage wisely thereafter. If you scalping an entra-day move, let's say uptrend, you allow retracement to 3/4 of the previous bar, no more. This is assuming you entered at the closing of the first green bar. If you entered at 1/2-3/4 retracement of the green candle, your stop is one or two ticks below the low of this candle. If the trade goes in your direction, trail stops until you stop out. As you see, there is no single way to calculate stops. Investors Business daily can say whatever they want, but they will not reimburse my losses.
One more thing, a violation of a really good stop that was very well studied is a sign of a strong move on the stop direction. If you got stopped out even though your analysis was rock sold, consider reversing and entering on the other direction. Most of the times you will catch a good run.
Good luck
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