Stop Loss Positioning Guide
#17
Ive noticed that myself, as some stocks do not have a pullback, and you end up missing the run. Its better for the educated client to make that call.
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#18
(04-05-2013, 06:40 PM)Sapphire Wrote: Ive noticed that myself, as some stocks do not have a pullback, and you end up missing the run. Its better for the educated client to make that call.

Weinstein found that 80% of break outs from stage one bases pulled back to the break out level but that figure was less than 50% for break outs of continuation moves in stage 2. Those statistics come from his book "Secrets for Profiting in Bull and Bear Markets" which was published in 1988 if I recall correctly. Whether that still holds true in the modern trading environment is a different matter.

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#19
One observation and maybe I am stating the obvious but he always has the stop below a moving average - for the trader stop either the 50 or the 200. In the AIG example it looks like he ignores the pivot low for some reason. I think it is because it is above both moving averages so it is dropped down below the MA which still has an acceptable % to the stop level.
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#20
(07-04-2013, 09:45 PM)gbarbs Wrote: One observation and maybe I am stating the obvious but he always has the stop below a moving average - for the trader stop either the 50 or the 200. In the AIG example it looks like he ignores the pivot low for some reason. I think it is because it is above both moving averages so it is dropped down below the MA which still has an acceptable % to the stop level.

This is still unfinished and I have many more examples from the GTAs to go through. But for example, in the S&P 500 recommendations from the March 2012 there was 37 stocks, of which 26 had a trader stop loss under their 50 day MA. So 11 didn't, and hence I don't think we can draw any conclusions on the importance of the moving averages for trader stop loss as yet. But my current assumption is that if the 50 day MA is close enough to the pivot low then it should be considered as well, but if it's not very close then it can be ignored and just the pivot low focused on.
isatrader

Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill – Reminiscences of a Stock Operator.
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#21
(03-20-2013, 08:27 PM)isatrader Wrote: This thread will cover where to place your initial stop loss and how to trail it as the price of the stock moves higher in Stage 2. For the initial examples I've used a Global Trend Alert Newsletter that I received from Stan Weinstein as a free sample last March. So the examples are the actual positioning as suggested by Stan himself in the March 2012 GTA, and hence we can study these old recommendations to learn the correct positioning for ourselves. So remember these are over a year old and were made when Weinstein viewed the longer and intermediate term outlooks as still bullish at the time, but the short term as only moderately positive, but "beyond extended" with more near term warnings than they could keep track of and with signs of “churning” on the tape, as stocks had broken out and gone nowhere in a hurry. So he was emphasising the "Forest to the Trees" approach - which can be found on page 75 of the book and suggests stock picking the best few chart patterns from the strongest sectors only when the overall trend is positive as it was back then. So hopefully that gives you some context to these charts as the majority likely failed to get very far in the short term, as it was around five weeks before the intermediate term top in the S&P 500 and hence there was likely a lot of failed breakouts in these, at least in the short term. Which I think highlights the importance of the overall trend and the type of buying you do at particular points in it. But that is a subject to discuss in another thread as this thread is to learn correct stop loss positioning and so doesn't matter whether these were successful or not, just that the stop loss would have protected the position from further downside if it failed in it's breakout.

I plan to mark all of the charts up on the daily and weekly charts that I use from stockcharts.com that show the key moving averages, relative performance versus the S&P 500 and the volume. But to begin with below are the Investor and Trader ideal charts recreated and updated from the charts in the book on pages 185 and 195 which around where you will find the stop loss section in the book.

Trailing Stop Loss Guide for Investors (Average 12 months)

I will write out the full description for these diagrams when I have more time. Refer to the Chapter 6 in the book for a full description of how to trail your stop loss. Below is the recreated diagrams...

[Image: attachment.php?aid=520]

Question re: initial Investor Method stops…

EGLE dropped 30% today on poor earnings and triggered my stop. The Stop Loss Positioning guide from Stan’s book states to set the initial stop under the lower support of the trading range. In his example, the trading range is flat ($35.15 – 40.15) and the stop is placed under the trading range support @ $34.89.

See attached EGLE chart. I had my initial stop set under the MA of the last pullback at $3.30. I realize after re-reading the SLP guide that this was likely wrong and I should have had it set under the support of the trading range. However, I’m unsure where that trading range should have been defined. I’m thinking it should have been under my green line support at around $4.00 (blue arrow). To give some background, I originally bought in @ $5.27 when the EGLE broke above upper level green line trading range in 2nd week of September.

So… my question is… was my initial stop too loose @ $3.30 (I’m thinking yes)? and if so, where would have been a better place for it based on the attached chart and when trading ranges are not entirely flat.

Appreciate any feedback.

Thanks,


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I've missed more than 9,000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and missed. I've failed over and over again in my life. And that is why I succeed. - Michael Jordan
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#22
(11-14-2013, 06:06 PM)theory6453 Wrote: So… my question is… was my initial stop too loose @ $3.30 (I’m thinking yes)? and if so, where would have been a better place for it based on the attached chart and when trading ranges are not entirely flat.

No your stop loss wasn't too loose for the investor method. It was in the correct place imo, as the rule is to not move it higher from the previous weekly swing low until price moves back near the high again. So in this case that didn't happen and it's bad earnings caused a sharp drop and triggered your stop loss, as EGLE failed on it's second significant pullback.

A possible exception in this case to break the rules and tighten your stop loss came last week when it sold down sharply to the 30 week MA on heavier volume, which you don't want to see in a Stage 2 advance as volume should decrease on the pullback. So, that could have given you reason to make an exception to the rules in this case imo.

Stop losses in the investor method start off quite loose and gradually tighten up as a stock advances in Stage 2 making continuation moves, but if a stock doesn't behave as it's supposed to then you should cut it early before it can damage your account. As it's better to take a smaller loss and be wrong, and then get back in if the Stage 2 advance reasserts itself. But you should always practice proper risk management from when you get into a stock in the first place, so that it doesn't damage your account. So if the stock loss is too far from your entry point in terms of risk, then you should position size at the outset to make it manageable or not trade the stock at all imo.


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isatrader

Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill – Reminiscences of a Stock Operator.
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#23
(11-14-2013, 06:39 PM)isatrader Wrote:
(11-14-2013, 06:06 PM)theory6453 Wrote: So… my question is… was my initial stop too loose @ $3.30 (I’m thinking yes)? and if so, where would have been a better place for it based on the attached chart and when trading ranges are not entirely flat.

No your stop loss wasn't too loose for the investor method. It was in the correct place imo, as the rule is to not move it higher from the previous weekly swing low until price moves back near the high again. So in this case that didn't happen and it's bad earnings caused a sharp drop and triggered your stop loss, as EGLE failed on it's second significant pullback.

A possible exception in this case to break the rules and tighten your stop loss came last week when it sold down sharply to the 30 week MA on heavier volume, which you don't want to see in a Stage 2 advance as volume should decrease on the pullback. So, that could have given you reason to make an exception to the rules in this case imo.

Stop losses in the investor method start off quite loose and gradually tighten up as a stock advances in Stage 2 making continuation moves, but if a stock doesn't behave as it's supposed to then you should cut it early before it can damage your account. As it's better to take a smaller loss and be wrong, and then get back in if the Stage 2 advance reasserts itself. But you should always practice proper risk management from when you get into a stock in the first place, so that it doesn't damage your account. So if the stock loss is too far from your entry point in terms of risk, then you should position size at the outset to make it manageable or not trade the stock at all imo.

Thanks Isa, and great point about the exception. I will definitely keep that one in mind. Cheers.

I've missed more than 9,000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and missed. I've failed over and over again in my life. And that is why I succeed. - Michael Jordan
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#24
Good morning,

Before I start to gather capital for new purchases, I'm evaluating my current holdings (of which there are many Stage 4 stocks Angry). My first step that I'm taking is looking at what stocks I hold are currently Stage 2 and where to start putting the sell stops. I'm evaluating my holding of AMZN and it seems to be a great Stage 2 stock at the moment, but the dips aren't coming anywhere close to the 30 week MA. Do I still set a sell stop below the MA even if that means 20%+ drop to reach it?

Here is a link of my chart. Huge assumptions that I've set it up correctly. http://schrts.co/WzuWn5

Thanks in advance for the advice. At the moment, there is no sell stop set. This is my first one.
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