Stop Placement Concept Question

["Steven Buss" <sbuss@xxxxxxxxxxx>]

There appear to be at least 3 concepts for thinking about stop placement:

1    Place a stop at a fixed dollar amount based on how much money I can
afford to lose <G>
2    Place a stop at some market price level that is determined by a
technical indicator (e.g., a level at which support/resistence is broken
(i.e., a breakout), moving average crossover, momentum indicator turn, etc.)
3    Place a stop at a fixed dollar amount based on trading system
backtesting and then doing MAE analysis (see Sweeny, "Campaign Trading" for
a discussion of MAE, Ruggerio for TS code that exports data for Excel graph
of MAE, Omega's new Portfolio Maximizer does MAE)  (Also, Pierre sometime in
the last several months posted some TS code related to MAE)

Are there other CONCEPTS around which stop placement may be thought about
that I've missed?

Obviously, listing #1 above is a joke for the oft stated reason that the
market doesn't care about my personal capital requirements.

I have a question related to concepts 2 and 3 above.

-    One reads that trading systems should first be backtested without
stops.  I assume that what is meant by this recommendation is that stops are
coded into the system based on technical indicator concepts (i.e., by the
kind of concepts in #2 above).  Am I right in this assumption?

Steven Buss
Walnut Creek, CA
sbuss@xxxxxxxxxxx
"There's nothing more practical than good theory."