Do initial stop-losses stop losses?

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Abstract

A great many traders use stop-loss rules in their everyday trading. In addition, during periods of high volatility, many traders attempt to protect their downside by moving their stops closer to the price action. However, there appears to be little real justification for doing this. There is a shortage of evidence that demonstrates that stops are actually providing the benefits that traders believe they are. This paper is an empirical study of the use of stops within a defined trading strategy. The methodology used within this paper can easily be ported to any individual traders’ strategy. In the specific case studied in this paper, the results suggest that initial stops degrade long-term portfolio performance.
Original languageEnglish
Pages (from-to)5-8
Number of pages4
JournalJASSA
Issue number4
Publication statusPublished - 2008

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Traders
Empirical study
Trading strategies
Methodology
Portfolio performance
Shortage
Justification

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@article{b704c8d0c9bc4e01a947fedb2bd3a010,
title = "Do initial stop-losses stop losses?",
abstract = "A great many traders use stop-loss rules in their everyday trading. In addition, during periods of high volatility, many traders attempt to protect their downside by moving their stops closer to the price action. However, there appears to be little real justification for doing this. There is a shortage of evidence that demonstrates that stops are actually providing the benefits that traders believe they are. This paper is an empirical study of the use of stops within a defined trading strategy. The methodology used within this paper can easily be ported to any individual traders’ strategy. In the specific case studied in this paper, the results suggest that initial stops degrade long-term portfolio performance.",
author = "Vanstone, {Bruce J}",
note = "{\circledC} Copyright JASSA, 2008. This article is reproduced with permission from Finsia- Financial Services Institute of Australasia.",
year = "2008",
language = "English",
pages = "5--8",
journal = "JASSA",
issn = "0313-5934",
publisher = "Financial Services Institute of Australasia",
number = "4",

}

Do initial stop-losses stop losses? / Vanstone, Bruce J.

In: JASSA, No. 4, 2008, p. 5-8.

Research output: Contribution to journalArticleResearchpeer-review

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AU - Vanstone, Bruce J

N1 - © Copyright JASSA, 2008. This article is reproduced with permission from Finsia- Financial Services Institute of Australasia.

PY - 2008

Y1 - 2008

N2 - A great many traders use stop-loss rules in their everyday trading. In addition, during periods of high volatility, many traders attempt to protect their downside by moving their stops closer to the price action. However, there appears to be little real justification for doing this. There is a shortage of evidence that demonstrates that stops are actually providing the benefits that traders believe they are. This paper is an empirical study of the use of stops within a defined trading strategy. The methodology used within this paper can easily be ported to any individual traders’ strategy. In the specific case studied in this paper, the results suggest that initial stops degrade long-term portfolio performance.

AB - A great many traders use stop-loss rules in their everyday trading. In addition, during periods of high volatility, many traders attempt to protect their downside by moving their stops closer to the price action. However, there appears to be little real justification for doing this. There is a shortage of evidence that demonstrates that stops are actually providing the benefits that traders believe they are. This paper is an empirical study of the use of stops within a defined trading strategy. The methodology used within this paper can easily be ported to any individual traders’ strategy. In the specific case studied in this paper, the results suggest that initial stops degrade long-term portfolio performance.

M3 - Article

SP - 5

EP - 8

JO - JASSA

JF - JASSA

SN - 0313-5934

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ER -