Stop Loss Positioning Guide

[Red Barron]

I still don't know where the 3.72 and 4.96 figures came from.

How was 3.72%-4.96% calculated from 0.809 ATR ? 3.72-4.96% of what? And with that 3.72-4.96%, how do you then calculate the price of the stop? #confused

Sorry, my bad. The % sign should be an x (i.e. multiplied by) really. It was just how I was referencing them at the time when I wrote this. So the range would have been be 3.72x to 4.96x the 200 day ATR.

[isatrader]

I still don't know where the 3.72 and 4.96 figures came from.

Stan recommended additional buying on a pullback to the 56 to 57 zone. So as the 200 day ATR was 0.809 at the time, and the investor stop position was at 52.99. That meant that 56 - 52.99 = 3.01. So therefore 3.01 divided by 0.809 = 3.72 times the 200 day ATR. Whereas if you bought at 57, then with the stop loss position at 52.99, that's 57 - 52.99 = 4.01. So therefore 4.01 divided by 0.809 = 4.96 times the 200 day ATR.

   

[Red Barron]

This chart says to "buy a close" above breakout resistance. Note, the quote says just to buy "a close" above resistance, not necessarily the 1st close after breakout. Curious and vague. I don\'t remember reading in the book to buy a close. Often, a stock will jump up and close at a high price only to tank the next morning or in after hours trading. So, I'm a little hesistant to buy at the close. I thought the book implied to just buy 1/8 of dollar above resistance. Sam's book badly needs a new edition written by him, or someone else w/expertise. The market and trading has changed so much since back then.

Trailing Stop Loss Guide for Traders (Average 2 to 4 months)

[isatrader]

This chart says to "buy a close" above breakout resistance. Note, the quote says just to buy "a close" above resistance, not necessarily the 1st close after breakout. Curious and vague. I don\'t remember reading in the book to buy a close. Often, a stock will jump up and close at a high price only to tank the next morning or in after hours trading. So, I'm a little hesistant to buy at the close. I thought the book implied to just buy 1/8 of dollar above resistance. Sam's book badly needs a new edition written by him, or someone else w/expertise. The market and trading has changed so much since back then.

That's because of newer information than the book as Stan has run a service since the 1990s called the Global Trend Alert for institutional investors, so the method has evolved over the years. Which was part of the reason for me starting this site as it helped me to gather more information on the method and talk with other people trading with it.

But to the specific point you mentioned. Read the Q&A that I did with Stan Weinstein in 2013 here: https://stageanalysis.net/forum/showthre...623#pid623 The second question on false breakouts highlights the reason for buying a close instead of using buy stops nowadays.

The method took me many years to get a handle of properly, so read as much as you can, and practice every day, as there's no short cuts I'm afraid. Althought there's a wealth of information on the forum from all the years of discussions. So that should help give you a leg up if you take the time to read through.

[Red Barron]

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.

Weinstein uses weekly frequencies in his book. Why do you instead use daily frequencies? I\'ve found that when I used the daily frequencies I get too many false breakouts and they don't give me the big picture for what a stock is truly doing. I don't want to be getting stopped out for a loss on 90% of the trades that I make. That is my fear by using the daily frequencies to draw lines of support and resistance b/c I feel they too often register just noise and don't reflect meaningful  and substantial directional moves that a stock is making. They don't allow for enough "play" of the stock. Granted if your stop loss gets tripped, and you had set it using daily frequency, you'll probably lose less $ than if a stop loss gets tripped that was set based on weekly frequency.

[isatrader]

Weinstein uses weekly frequencies in his book. Why do you instead use daily frequencies? I\'ve found that when I used the daily frequencies I get too many false breakouts and they don't give me the big picture for what a stock is truly doing. I don't want to be getting stopped out for a loss on 90% of the trades that I make. That is my fear by using the daily frequencies to draw lines of support and resistance b/c I feel they too often register just noise and don't reflect meaningful  and substantial directional moves that a stock is making. They don't allow for enough "play" of the stock. Granted if your stop loss gets tripped, and you had set it using daily frequency, you'll probably lose less $ than if a stop loss gets tripped that was set based on weekly frequency.

Hi Red Barron,

When you reply, please write underneath the quote box. As I keep having to edit your posts, as you are writing within the previous quote each time. So scroll to the bottom after the quote and add a return and then write underneath.

To your question. All the examples I did in this thread show both the weekly and daily charts. So not sure what you are referring to here. I think you need to spend more time going through the site throughly, as there is a lot of information that could help you understand the method better. As there's literally years of posts, and all of your questions so far have been asked multiple times. So you should be able to find most of the answers in the threads.

If you read my through my journal thread - which I've been posting all of my trades in for over 5 years, you'll see how I calculate my maximum stop losses using 2x the 52 week Average True Range (ATR), which allows for 2 weeks of the particular stocks average movement. As every stock has different volatility, and so I believe that the ATR is the best way to judge the distance and then position size accordingly. Here's the link to my journal thread: https://stageanalysis.net/forum/showthread.php?tid=32

Also the book is only the beginning when it comes to understanding the method, as Weinstein has run a service called the Global Trend Alert for over 30 years since the book was published, so a lot of our understanding of the method has come from examples from that. For example the sub stages like Stage 1B, Stage 2A etc. And also other people like Mark Minervinni, who has expanded on the trader method in his trading and introduced new concepts like the Volatility Contraction Pattern (VCP) over the years. Reading his two books would really help your understanding too, and I highly recommend them.