Stop Loss Positioning Guide
#41
Could you please flesh out more so using the ATR. Why it is used, when it used, why you give an ATR percentage range and not just one percentage number, etc. Thanks
Reply
#42
(02-17-2018, 12:21 PM)Red Barron Wrote: Could you please flesh out more so using the ATR. Why it is used, when it used, why you give an ATR percentage range and not just one percentage number, etc. Thanks

Hi Red Barron,

I use the ATR to determine the volatility of a stock, as each stock is unique, so using arbitary percentage numbers like putting the stop loss 6% below is fairly useless as with some stocks, especially small caps, they might have a daily movement of that much. So the ATR is a useful way of adjusting position size and stop loss distances to account for the each stocks unique volatility.

With the examples in the thread, I took them from Stan's Global Trend Alert newsletter. So for example in the following:

In March 2012 Abbott Laboratories (ABT) was recommended as a continuation buy on a pullback towards the 56-57 zone. The Trader Stop Loss was given as 54.49 and the Investor Stop Loss was given as 52.99.

So the reason for the ATR range was that, the entry point wasn't a single figure, but the stop loss position was. So the entry point could have been anywhere from 56 to 57. Hence, if you bought at 57 then it would have a greater distance to the stop loss than if it was bought at 56. So I stated the ATR range, which helped to get an idea of how far Stan would recommend entering a stock from the stop loss position.
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.
Reply
#43
All I can say is wow! Was wondering about traders sell stop.. if it needed to be below a round number, below the correction. Can't remember reading that in the book.

I have been doing episides on my youtube channel practicing, trying to iron out the kinks from not having done Stan in many years.

Everytime I do a new practice run on an instrument, new questions arise. Main reason I'm here, to use the communities experience and have answers.

I still many answers unanswered, such as sma 30 violations for the investor, if NO 7% correction has been observed in the stage 2 run. Does the investor exit? I reasoned myself in saying yes, as Stan mentions the investor should start behaving like the trader when the sma starts to flatten out.

Also, how agressive does the trendline have to be in order to use it for half position exits? Just the 3 contact points? Or an min. angle required (ex. 45`)?

Swing rule. Only double bottoms/tops and head and shoulders accepted as pattrerns? Or anytype of classical chart pattern? If the latter, horizontal breakout lines accepted as well as slanted (ex. symmetrical triangle)?

I now draw my line on candle close. Do i have to use lows and highs for stans framework? Or as long as I'm consistent in its usage?

I'll keep digging in stageanalysis.net incredible wealth of information for answers.

Regards,

Patrick


(03-21-2013, 10:59 PM)isatrader Wrote: Allergan (AGN) was said to be consolidating beneath final resistance at 90, and it was recommended as a breakout buy (on a closing basis) above 90. The Trader Stop Loss was given as 85.99 and the Investor Stop Loss was given as 82.99

Trader stop - on the daily chart the last pivot low was 86.45, which had been tested twice in a four day period the previous week, and then had rallied off from it, and was testing the top of the range just below 90. So the suggested stop loss was below the pivot lows, and had been placed below the whole number also.

Investor stop - 82.99 was the recommended level, which below the last notable swing low on the weekly chart of 84.30. The 30 week MA was at 83.86 and so I would have expected it to go below the half point at 83.49, but the 200 day MA may have been considered also which was at 83.20, but I'm still not clear if the 200 day MA is used or not when considering the stop position. But I can't see any other reason for going that far below the 30 week MA on the chart.

ATR distance to stops - For AGN the ATR(200) was 1.564 at the time of the recommendation and so:
  • 2.56% ATR - Trader stop distance
  • 4.48% ATR - Investor stop distance
Other observations - AGN also had below average volume for the most part; relative performance versus the S&P 500 was just positive on the weekly, but had been weakening for around six months; and the 30 week MA had just turned up. It had been in a fairly tight range for around four months, but was still moving gradually higher.
Reply
#44
Hi,

Remember, traders and investors take half their position on a trendline violation or swing rule tager reached.

So as an investor, you still get to lock in profts as a trader would.

Regards,
Patrick

(11-25-2015, 04:28 PM)mongoose1969 Wrote:
(11-25-2015, 09:24 AM)isatrader Wrote: It depends whether you are a trader or an investor, as the stop positions for both are very different. If I assume that you're an investor then the stop loss position is a long way a way currently, and the stock is in Stage 2B with three continuation moves in the last year since it's Stage 2A breakout. So I believe the book suggests taking some profits off of the position when it's extended after such a great Stage 2 run, as it is in the later stages of a normal holding cycle of up to 12 months.

The reason for the wide stop losses in the investor method is that they are more disaster prevention stops imo, as you need to allow stocks to make natural corrections based on their own normal volatility when they get extended to give the change for the moving averages etc to either catch, or pullback all the way to test previous lows. Think about it a different way. AMZN is currently 89% above the Stage 2A breakout level in under a year, and has already had one 22% correction, which if you'd had a tighter stock than the investor stop method suggests, would have made you miss the additional 42% of the up move.

I'd say as an investor the stops are there to protect you from disaster, and are not the same as trader stops, so only put them where you are willing to actually give up on the investment. Of which the investor method stop is a good guide imo.

So make you own decision on how to proceed. But I recommend re-reading the stop loss sections in the book and looking at historical examples of stocks in similar positions.

Thanks! You are correct in your assumption. I'll be working this strategy from an investor point of view. I understand where the initial stop loss should have been (had I known about this strategy a year ago) and was working through the chapter to make my decisions about the trailing stop loss set points. I appreciate you bringing up the point of a holding cycle lasting about 12 months which will cause me to consider my current position stake.

For now, I'm going to protect myself at the previous continuation move. and see what happens. Off to re-read!

Hi again!

Also noticed you use line graph.
I was wondering if that would be better for the stan framework. Is that the low of day you use to plot the line?

I'm having an internal debate as what data point to use as trader to bailout when 30 ma is breached.. wait for close of candle (if close above 30 ma, you stay in trade). Or any single pruce action under 30 ma and its full exit?

Isa, are the examoles of Stan drawung trendlines or ussing swing rules in the GTA newsletter? Could give insight..

I'll keep reading on my end..

Regards,

Patrick


(11-24-2015, 04:52 PM)mongoose1969 Wrote: 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.

Hi Isa,

Could a trendline be drawn from correction points above g e i?

Regards,

Patrick

(11-14-2013, 06:06 PM)theory6453 Wrote:
(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,
Reply
#45
(03-13-2018, 01:30 PM)badcharts Wrote: Hi again!

Also noticed you use line graph.
I was wondering if that would be better for the stan framework. Is that the low of day you use to plot the line?

I'm having an internal debate as what data point to use as trader to bailout when 30 ma is breached.. wait for close of candle (if close above 30 ma, you stay in trade). Or any single pruce action under 30 ma and its full exit?

Isa, are the examoles of Stan drawung trendlines or ussing swing rules in the GTA newsletter? Could give insight..

I'll keep reading on my end..
Could a trendline be drawn from correction points above g e i?

Hi Patrick,

In regards to trendlines it's been a while since I've used them as I prefer to only use horizonal lines and the two main MAs, but I believe if you do use them, then then the points to join are the weekly lows, and that you are looking for three points usually minimum for a decent trendline, and it can be draw at any level in the Stage 2 advance if those points exist.

If you are using the trader method then you'll rarely get anywhere near the 30 week MA in a trade, and you should be using the 10 week MA much more, which equates roughly to the 50 day MA.

There are no trendlines in the charts in GTA reports that I had, only the 10 and 30 week MAs are used in the examples.
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.
Reply


Forum Jump:


Users browsing this thread: 1 Guest(s)