Mark Holstius Elite    Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL  User Profile | This review started with the 9,378 trades generated over the past 15 years by my FTM portfolio. I obtained the historical stock data to identify the lowest low for every symbol for the duration of each trade and used that to determine if exiting at a stop during the trade was beneficial or not. I used Stops ranging from -1% to -20%, and the results are tabulated below; The data in Black cells refers to the original FTM stats. The P/L% sum of all original individual trades was 14,165% (this is NOT a measure of CAR). The columns contain statistics for the various Stops ranging from -1% to -20% in rows. Since it’s a popular number, I’ve highlighted the row for a Stop set at -10%. 1) Of the 9,378 trades, 264 were exited early because a low during the trade triggered the -10% Stop Loss. 2) 55 of those exits were beneficial and resulted in an increase of +153% to the 15 yr P/L% sum of trades. 3) 209 had a negative impact. If those 209 trades had been allowed to continue they would’ve had a P/L% better than -10%. Those “missed opportunities” would’ve added an additional 1,641% to the sum of trades vs the -10% Stops. 4) When that missed potential of 1641% is considered, using a -10% Stop resulted in a decrease in the P/L% sum over 15 years of -1,488% (12,677% vs 14,165% in the original sum), along with a small decrease in the HR. I ran the same analysis with my larger dataset of 25,118 unique RTM trades over the past 15 years with similar results; 835 Stop Exits at a stop of -10%: 242 beneficial and 593 with a negative impact. These statistics are for this particular set of trades. Even though it’s a large dataset, it’s unique to those trades (a curve fit). While using stops may be beneficial with longer duration strategies, these tests appear to support the idea that Stop Losses may not be helpful with short term RTM trades. In every case, any positive impact from getting out before a loss was overshadowed by the negative impact of missing trades that were more profitable than the stop. I’m currently expanding my previous work on Limit Orders and hope to have more information on that in a few days. As always, I welcome comments and suggestions. Mark [Edited by Mark Holstius on 8/31/2017 7:35 PM]  Attached file : 01 FTM Stops.png (211KB - 792 downloads) Attached file : 02 FTM And ARM4 Stops.png (227KB - 705 downloads) |
