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From: "Philippe" <Synergy@xxxxxxxxxxxxxxxx>
Date: Mon, 27 Sep 2004 20:16:43 +0200
Perry Kaufman says the same when he states for trend following approach :
"Stop losses are counterproductive. Say you read somewhere that you should
only risk 1% of your trading capital on any given trade and you have $25,000
....
$1,000 stop-loss. So it comes down to the closer you set your stop-loss, the
more often it's going to be hit. This has very little to do with your
trading system. Setting small stop-loss almost guarantees that you're going
to be stopped out.
Yes, a very good point for evolving a system. That process must be
done without a simple stop loss in order to weed out the bad 'rules'.
However, this also introduces a problem with the exit strategy, as it
cannot be a simple stop loss idea. Perhaps the answer for evolution
is to flip-flop long and short, then add in the stop loss mechanism
after a nice system has been developed.
It is a reflexive problem.... but certainly one worth tackling.
r
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