Stop Loss setup - by DJ - Are there any Rules of Thumb for

[#1]

setting up triggers? Say 15% for the trigger amount and then 1% + - for the trailing amount. I sold my S&B shares quicker than I wanted to, because they dipped 10% and met my trigger.

[#2]

Rule of thumb? (which means that you ignore it at your discretion . . .)
Worst case - look at losing a MAXIMUM of about 2.5% - 3% of your entire portfolio on any one trade. i.e. on a 100k portfolio, set your stop to lose a max of about R2.5k on any one trade.
Utter utter worst case - this will allow you 32 losing trades in a rox before you wipe out your portfolio. Hopefully, by about the 10th losing trade in a row, you will have learnt what yer doing wrong and FIX IT!

[#3]

ah ..am man who speaks from experience of having losing trades

[#4]

seriously though....while still trying to keep this is simple as possible it is not quite a simplistic as AVS suggest and your stop loss should not be a function of your portfolio size. The stop loss be a percentage of your position size (i.e. specific trade size). You then need to look at volatility and the % loss should be a function of this....higher volatility bigger stop loss..... So first you work out position size....a function of your portfolio....then you determine volatility ...then you determine % stop....

[#5]

I use general market volatility for swing trades...(i.e a trade I hold for a few weeks). a while back ...maybe 6 months we had average daily top 40 moves of say 50 pts....now we have ave daily moves of 100pts so if I had a 10% stop then I would now have a 15 or 20% stop...(these are not actual figures just a demo)...you want to trade through the noise....even the good ships fall a little when the tide goes out....

[#6]

Thanks to all - I will be out of town, first two weeks in January (Antarctica) hope I get it right by then

[#7]

Chookie, there's no absolute perfect way to manage stop losses. But AVS has a good point - you need to focus on managing risk. I wouldna get too technical about it - just keep in mind each loss impacts your portfolio. It's part of trading but you sure wanna keep your losses to a minimum. Find a level for stops and exits that YOU are comfortable with.

[#8]

Agreed.
Rule #1: Protect your portfolio while doing real trades.

Do all the intricated technical calculations if you want, work out your risk and position size and consider the volatility if you want to fly so close to the trees. But after you've done all that, and the resultant stoploss lets you lose too much of your portfolio, then go back to Rule #1.

[Russ]

I always ensure I have tight stop-losses in place when I go to Antarctica.

[#10]

The way to manage risk holistically is not through a stop loss...this is merely a component of managing the risk. I am not talking anout getting technical....I am fanatical about keeping things simple (if you cant work it out in your head its too complicated)....you have to manage position size first then stop loss follows...a stop loss is a sine quo non of trading it goes without saying....whether its 10% or 20 is actually not as important as having the apropriate position size for your portfolio.....a 50K postion on a 100K portfolio with a stop of 2 or 3 k is ridiculous ....just get your position size right first...might sound obvious but you will be amazed at how many guys who only have 100k sit with the majority of it in one position....

[#11]

I wanted to add that AVS makes the mistake when he thinks that the stoploss amount id all you put at risk....it is not all you put at risk...your stop may not be triggered for some reason....with geared instruments you may lose everything so you have to first think position size when you think about risk.....when you think about how much you are prepared to pay to find out if you are wrong or right you think about stop loss....when you enter that trade you shouldnt be thinking I may lose 15% ....you should be saying I am prepared to pay 15% of this position to find out....when you enter the trade you make the payment...

[#12]

Thanks chaps - have reset all to 20% and 1% + - trailing - prepared to lose the amount if it happens