The Stop Loss Dilemma - Risk Management vs. Strategy Performance

[@tomasliptak6401]

It might affect profit factor and thus the final result negatively, but EASILY compensates for it with much better and stable Sharpe ratio, predictability, consistency and money management rules. My strategy calculates the capital to every single trade based on the distance to stop loss to somehow have a fix max loss per trade. Also I cannot imagine going to sleep without a proper stop loss. It's like an insurance - you pay the price every trade to be saved big time.

[@miguelangellopez4395]

Absolutely fantastic this concept! I'm really looking forward to try this on my own systems. Thanks a lot Martyn! You're definitely the man!

[@tabjohn1048]

Hi Martyn! This video was ABSOLUTELY AMAZING! Since few weeks I'm strugling with the dilema that you described. I'm implementing some of my ideas and solutions but after this video I will combine my ideas with yours! Thanks for such GREAT CONTENT!

[@louislamprell2354]

Awesome vids as always. Are you exiting a little portion of your trade at each over bought mark, so that only a small portion gets taken out at the ESL? So say taking off 0.2% at each overbought mark? That was the only part not fully clear

[@eTaupe]

Really good ! I will try that one in 2022

[@seanjohnson7145]

Thanks Martyn really awesome series, Im going to put these techniques into practice and test test test test!

[@munkh-odjargalsaikhan258]

wow! good stuff. I will try this on my mean reversion strategy straight away! Now the issue is when to enable the overbought-oversold stoploss... I am thinking to enable it as soon as my take profit level (i set it as a moving average) goes negative. any suggestions? thanks!

[@more_yasnotsi]

That's a great idea, thanks a lot!

[@garrykimovich]

This seems like it would make performance worse, since you're still always taking a stop, aren't you? It seems like the net effect would be that your initial stop is actually getting even smaller. Suppose my normal stop is 10 points but I use a 50 point emergency stop instead. If price goes against me by 10 points I hold on and cover at a 5 point loss instead of the normal 10. If price goes against me by 15 points, then I hold on until it rebounds to 10 then I take my loss. Each time the market goes against me further, even if I hold on for a bounce before getting out, my loss always gets bigger. It's hard to visualize how this helps performance, unless you have some other way to determine when you should ignore the stop when it bounces and just hold on all the way until the loser turns into a winner.

[@danielracovitan9779]

what is a reasonable Emergency Stop Loss percentage?

[@mohamadalikolahdouzmohamad5877]

Thank you very much, That was helpful.

[@teebone2157]

I use modified conners RSI but will look into this as well

[@Jean-SébastienPaquet]

Great video!! thanks a lot.

[@vincentjean6756]

Thanks for the series. I do not understand how this would imptove results. Would simply having multiple stops at various prices below the range acheive the same results? From a click trader perspective it I do not understand the benefits.

[@arfa9601]

The logic is the same as the entry mechanism for breakout systems. When the price breaks out of a zone, you can either enter instantly or rather wait for a pullback to enter. Since random walk factor is more prominent in lower time horizons it’s expected that the breakout has purged most of liquidity lump at the zone proximity which will result in correction or pullback in price. Implementing a traditional stop loss for example in a long trade right below a swing low is identical to entering a short trade right upon breakout of swing low zone. However, exiting the long trade at OB/pullback signals below that swing low is identical to entering a breakout short trade after a pullback. In the latter, you will have that random walk (mean reversion) factor supporting your directional bias while taking liquidity from market. However, this is not so straightforward when you have large sized orders which will face lack of liquidity and friction in order filling which is another discussion. Cheers

[@cusco4x295]

You can do even better. Insted of closing the trade at those points, you simply open an hedge position of the same value, and you manage the trade to turn a loss into a profit. How about that??

[@georgedaskaleas3736]

So informative and valuable, as always. Thank you, Sir.