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Recommended Stop Loss Strategy
sa poth
posted Sep 24, 2015
Finance Theory

All,

As a general strategy should stop-loss be "n" times the profit-target or the opposite (profit-target being more)?

Some suggest having a big stop-loss (say 3 times the profit-target) so that it is not easily hit

Other camp suggests taking quick small losses so that we are quickly out when the trade setup doesn't work out

Also has trailing stop loss worked better than a profit-target with stop loss? Would you recommend it?

What has worked best in your experience and what do you recommend?

Thanks, Sam

1 response
Alisa Deychman
Sep 25, 2015

The stoploss you implement depends on your strategy, your risk appetite, and your time horizon. You can use the research environment to simulate different parameters and their impact on your algo.

Here's a webinar showing how to craft a trading strategy: https://www.youtube.com/watch?v=mNkvHEbVt0s

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.