Ask Colin

STOP - LOSS OR SELL STOP

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  1. Is your sell stop triggered by an intraday violation of your stop level or by a close below your stop level?
  2. If a share drops suddenly with no chance to exercise my stop loss, should I sell the next day, or wait for a rally, closing the gap, and then sell?
  3. A book suggests stop-losses be set 5% below support for US stocks with a beta of 1 and 10% below support for US stocks with a beta of 2. Does this apply in Australia?
  4. I have heard that a portfolio should have a stop-loss at 2%. What do you recommend?
  5. In December 2003, I bought Ammtec (AEC) at $1.56. It climbed to $1.85, but then fell through my stop. Can you give me some pointers? (Full question is in the answer file)
  6. How do I avoid being shaken out when good stocks suffer sharp falls and then recover?
  7. I sold shares that later rose. The missed gains would have exceeded losses on the rest. Should I have just held them all?
  8. Do you use a broker who takes stop loss orders?
  9. As an example, Boral (BLD) has been going up for a long time with no significant corrections. How does a long term investor pick a stop-loss level in such a situation?
  10. If a stock falls one cent below your stop and closes above it is this a SIGNIFICANT trough?
  11. I use Kagi charts drawn on closing prices to place my stops. Is this where your stops are?
  12. You place your stops below SIGNIFICANT lows. How do you define SIGNIFICANT?
  13. When setting an initial stop-loss level under an accumulation or consolidation area, should it be under the lowest low or the last trough?
  14. Is it best to sell immediately a stop-loss is hit or to wait for a rally?
  15. How long should a moving average be if used for a stop-loss level?
  16. I read in an article to place a stop order 10 ticks above a high. What do
  17. When a stock goes ex-dividend, do you adjust your stop-loss?
  18. Should stops be executed during the day, or the next day (end of day data)?
  19. Do you take your stop-loss from the close of the day or the low?
  20. If your stop-loss or protect profit stop is hit during a day, but the market closes above your stop, do you still sell the next day?
  21. If many investors set their stop-loss at the same price and there is a profit warning, how do we get out if everyone is trying to sell?
  22. Is your stop-loss always 2% below the last support level?
  23. Is it better to sell when a stop-loss is hit, or wait to sell into the first rally?
  24. When setting a stop-loss below the last significant trough in an uptrend, do you ignore an extreme spike down?
  25. To deal with high market risk, I have halved my amount risked per trade. Now I often cannot buy sensible amounts. How do you deal with that?
  26. In Trade Your Way to Financial Freedom, Van Tharp suggests a stop that is twice normal daily volatility in a addition to you long term stop. Is it necessary?
  27. When I paper trade futures with a 10-point stop-loss and small capital it is OK, but not when I actually trade. Can you help?
  28. How do I choose the appropriate retracement for placing my stop-loss?
  29. I use WEEKLY line charts to select buys based on your higher trough/higher peak model and set my stop-loss/protect profits points accordingly. What I am unclear on is, barring large price falls, should the stop-loss be triggered by: (a) intra-day breaks; (b) daily close breaks; or (c) only, when the weekly close is below the previous trough level?
  30. Questions on the Trendlines column in Shares magazine December 2001 (complex question
  31. I have been working on a trading plan for the last 12 months, and had all the major elements worked out. Then, on the morning of the 11th of September (following the catastrophic events in New York) all my positions opened below their respective stop losses. My trading plan had no contingency to deal with events such as those that transpired on the 11th of September 2001. Needless to say that the next few days were gut wrenching as decisions had to be made to deal with the situation. The saving grace was that I only had 20% of my trading capital exposed at that time (as that part of my plan which dictated total exposure to the market according to market risk). 1. Could the events of September 11 be an exception to the strict discipline of ruthlessly exercising stop losses (as part of a trading plan to deal with these events)? 2. How does one build a trading plan for these situations?
  32. Let's assume that price broke out of broad trading range. This is your buy signal. Then price did not form an up trend, instead it formed a reverse pattern (eg. double top) and finally "made lower peak and then moved below the last trough". Is this your sell signal here or you prefer to wait till "lowest support level" - set just below broad trading range is reached ? My confusion here comes from fact that there was no up trend in a first place so there is no logic in talking about trend ending. From other point of view reverse pattern and end of trend is quite clear.
  33. How do you feel about setting very tight initial stops? What I am suggesting is positions either move ahead virtually from day one or get stopped out and take a small loss. My reasoning is a loss of $500 could be used more effectively to open more (researched) positions which may or may not move in the right direction. I have noticed in your notes that your stops seem to be, (in my mind), pretty generous, correct me if I am wrong.
  34. I was hoping you could clear up something for me regarding stop loss exits. When you purchase some stock then put in place a stop loss exit point what happens next? Lets assume the price falls touching the stop loss price, do you run a program that alerts your online broker to sell? Or do you just receive a warning that alerts you to the situation when you next get back to your computer screen, which you then have to act upon manually?
  35. I am developing a medium to long term trading plan based on breakouts from significant trading ranges (consolidations). However, I am struggling with where to place my initial stop losses. For the initial stop loss on a long term trade I prefer a technically based stop rather than one on volatility and have identified the following alternatives (all based on weekly charts): a) Just under the lows of the trading range b) Just under the last low within the trading range (a trend stop) c) Just under the breakout point (i.e. just below the highs of the trading range) d) The mid-point of the trading range (as per David Fuller using P&F charting)
  36. I have a problem with PTD because the chart says I should sell, but the fundamentals look promising. What should I do?
  37. In determining the break in an uptrend, should I use a 5% stop, or daily/weekly moving average cross over?
  38. Using your article "Learn to Avoid the Destructive Trade", with a trading capital of $100,00, I calculated that I should buy $3000 worth of a stock. However, the stop at 2% of capital is $2000, which is 66% of the investment. Isn't this too high?
  39. What methods do you use for getting out of a stock if its rising trend fails?
  40. Which one indicator is best to identify strongly trending markets?
  41. What is your trading method's 'edge'?
  42. Do you ever use a percentage stop-loss because your normal stop-loss is too far away from the current price?
  43. In various articles you say that we should only risk between 0.5% and 2% of our trading captal. However, charts of some of your previous trades, with stops below the previous low, rarely meant less than 2% risk. Are there times when we have to risk more than 2%?
  44. How do you set your stop-loss?