What is your Stop Loss strategy

[Krolik]

Hello,
for those of you who have stop loss orders entered for your positions what is your strategy?
- at what % market drop is your order going to be executed? From what I read most people set it at 15-20% drop from market price.
- what percentage of your position are you going to sell ? All shares / ETFs  or just a percentage of your position ?

Thank you for your wisdom!

[The_Big_H]

Buy index funds

If it goes down, buy more aggressively towards stocks (since market drops cause my allocation to slip too heavy on bonds)
If it goes up or stays the same, Buy at usual allocation

Stocks are never sold though. If I need to rebalance to more bonds I just buy more with new money coming in.

It is an extremely POOR idea to try and sell stocks during a downturn, locking in your losses and making you have to decide when to buy back in

If one cannot handle seeing a portfolio decline temporarily during market drops they should not be in the market in the first place as it’s a recipe for losing money. Better to just have cash.

This “stop loss” strategy of mine has made me whole again (ie I’m back where I was pre drop) even though the market has not fully gotten back to its high

[Freedomin5]

+1 Why the heck would I sell at a 15-20% loss, thereby locking in my losses? I’m still in the accumulation phase, so I’d just keep buying in to rebalance my portfolio. If I were in the withdrawal phase, I would sell to rebalance to my target allocation.

[Financial.Velociraptor]

I usually go 20-25% percent as a "Trailing" stop loss.  Warning - don't enter your stops in the market.  The market maker can temporarily move the share price  a few percent and "pick you off".  A stop entered in the market is like playing poker with your hand showing.  Track it offline or with a cell phone app and sell the next day if you close below your stop.

[Buffaloski Boris]

I kind of do the opposite. I have limit orders for ETFs that execute if the price drops below a certain price. Unless you’re investing in very volatile single stocks, I don’t see much point in a stop loss.

[helloyou]

I use stop loss from time to time to avoid big drop. I sell a portion of my stock when it drops below profit level (or a small %).

But then I intend to buy back at low. It's not to be out of market, but to get the opportunity to buy lower.

It does work sometimes but not all the time. I missed many grow due to this.

At the same time, stop loss also prevented me to be stuck into some stock which then ended up loosing 20%+

[hodedofome]

Trailing ATR is a much better stop than a fixed percentage. It takes into account volatility which can vary based on market or market environment.

https://www.cis.upenn.edu/~mkearns/finread/trend.pdf

[MustacheAndaHalf]

I usually go 20-25% percent as a "Trailing" stop loss.  Warning - don't enter your stops in the market.  The market maker can temporarily move the share price  a few percent and "pick you off".  A stop entered in the market is like playing poker with your hand showing.  Track it offline or with a cell phone app and sell the next day if you close below your stop.

A stock moved a few percent by a market maker sounds like a stock with a very small market cap.

I have one account for market timing with leverage, which is where I use stop-loss orders.  If I don't login and don't check my phone for whatever reason, I want to sell as the losses become more than I expected.  I have staggered stop-loss orders at lower and lower prices, which represent half of the shares I need to sell (the other half, I need to step in manually).

To me, leverage is dangerous and stop-loss orders offer additional protection (but not a guarantee).

[vand]

None.

A stop loss is a for risk contol in a trading context.

For accumulated unleveraged investments you should do the opposite - buy more - as the price goes down.

Yet the world is both types who do the opposite of what they should - traders who increase their exposure when the market moves against them, and investors who decrease their exposure when the market moves against them.

[celerystalks]

Perhaps instead of a stop loss order put in some long term good ‘til canceled (GTC) limit buy orders.

For example VOO closed at 291.8.  A 20% drop would be 233. So placing a GTC buy order For VOO with a limit price of 233 would ensure that when the market drops 20% you are buying instead of selling.

Note: most brokers may require you to have cash in the account to cover the anticipated price of the trade should it execute. 

[Krolik]

Thank you all who answered my question. Appreciate the information.

[aboatguy]

I kind of do the opposite. I have limit orders for ETFs that execute if the price drops below a certain price. Unless you’re investing in very volatile single stocks, I don’t see much point in a stop loss.

. Concur!

[ChpBstrd]

Mine is to not use stop losses.

Use a protected put or collar strategy to set a firm floor on your worst possible performance. These hedges also appreciate due to the sort of "volatility events" we worry about, especially when you buy them during low-vol times. At one point in March, I had a collar position where both the stock and the option position I bought as a hedge 12 months ago (!) were worth more than I had paid for them. That's a better spot to be in than liquidated, because I could either go to cash or sell my hedges for a profit.

Set a trigger point at which you will exit your hedges and just hold the stock. Mine is 20% down from the most recent high. Basically, if I can avoid the first 15-20% of losses during the sort of routine corrections that happen about every year on average, I'll do extraordinarily well.

[chicklets123]

At what point would you sell some stocks if there is a certain return to limit your loss?
A profit of 50% or 100%? Take out your initial investment? Or is that a bad idea too slowing a good return stock?


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