Stop Loss doesn't seem to work

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Stop Loss doesn't seem to work

posted Aug 26, 2014

Hello,

The stop loss when using StopOrder doesn't seem to work. I am placing my stop 2% below the previous days high or 2% above the previous days low (if going short). My code is basically detecting local minimums and exiting the trade with the opposite aroon crosses over. The problem is sometimes when the algorithm makes a bad call the stoploss is not working and it gets stuck in a bad trade for too long. If you look at the March 31st trade its clearly not using the stop loss. I have a draw down of over 6% in that one trade alone which should be impossible if the stop was working.

Thanks,
Michael

2 responses

Hey Michael,
I would have to dig through the transactions to know for sure, but my guess is that the issue is with old stop orders being triggered. If you get a buy signal and the price goes up, that might trigger one of the previous stops from a short sale to trigger, and it will buy again. Also, I'm not sure that you can be sure that 2% below the previous days high is less than the current price for your stop, if you place a stop price above the current price, the order won't fill.

I would try canceling old stop orders completely once you place a new 'target order' because you don't want the old stops to trigger at some later date. Below is an example of one way to track orders and cancel old ones. Let me know is this wasn't the problem.

David

def initialize(context):  
    context.orders = {}

def handle_data(context, data):  
    now = get_datetime()  
    # place a new order  
    context.orders[now] = order(some stock, 20, style=StopOrder(some stop price))  
    # cancel all the old ones  
    for dt in context.orders.keys():  
        if dt < now:  
            cancel_order(context.orders[dt])  
            # Delete it from the orders dictionary  
            del context.orders[dt]

Hi David,

I was able to fix it using the context.stop_loss which was much better and allowes me to use trailing stop losses.

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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.