2% stop loss rule?

Wherever you heard that, Dave, I'd respectfully suggest that in future you might want to ignore all trading-related "information" from that same source, just in case it's all of the same quality and reliability.

 

Uncle Buffett used to say: In life you don't often see a fat pitch, so when you see one DON'T bunt.

 

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IBD+ they know how to make money, allows risks 7 or 8%; but that's per stock/cash , not on capital or account.LOL Good question To small a stop loss is counter productive+ too commission intensive /waste....................................................................................

 

So I shouldn't day trade?

By the way, what is the logic for 7%-8%? I read O'Neil's book, at one time tried to implement his 8% rule and was stopped out on FB (at $20), GOOGL (at $500), AAPL (at $450 before split). I am still waiting for FB to get back down below $100 so I could get back in.

I no longer have an artificial 8% stop on my trades. Some coaching on this will be greatly appreciated.

Thanks.

 

Thanks Xela. It's just something I heard in the past, it doesn't mean I'm going to use everything I hear. This information was from someone who works in treasury at a big Austrian bank for more than 10 years (can't say the name) and he is a close friend, but it's not important. I just wanted to share my opinion, thanks

 

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Its like Paul Tudor Jones having a 9.99% stop, but not a 10%.Ironchef,do i believe PTJ would use a 9.99% stop, never 10%?? YES;older oil trends+ 1987. .....And that is per month,NOT per trade!! Yes.And he must have a better than average hit rate, he cuts back when losing. With an average hit rate , no need to cut back.

And its [IBD] stop 7 or 8%; so $35 or $40 on $500 GOOG looks right[ So it had to be the wrong timing, or SEPT slop sell off] Im not trying to help the FB shorts LOL; even if you were kidding about buy FB @ $100?? i would not buy it now @100 , why??Its number 6 in group almost 7 stocks better than FB + its only keeping pace with QQQ[average benchmark],
year to date 6 months; but FB doing better [than qqq] in past 4 weeks. I cut a loss on small cap SUPV, so cant do super all the time LOL[Edit some said he not dong average now; thats OK, he did 5 years @100%per year, rounded up. He may not have a monthly stop that wide now, but that does not change my point]

 

Thank you for taking to time to reply Mr. turtle. I think I understand what you are trying to tell me.

 

Well, the 4-5% drawdown is a very common risk management metric for hired gun PMs at multi manger funds. So it’s not that far from the truth, oddly enough.
Eg Millennium uses 5/2.5 drawdowns for their PMs - after first 5% drop your risk is halved; then another 5% (or 2.5 on the original capital) and they show you the door.

 

Thanks Secret Santa for affirming my statement. Could you explain me what u wrote. What do you mean "after 5% drop risk is halved". I don't understand this.

 

Let’s say a PM got 200 million to play with. If he loses 10 million (5% of 200), they take half of the capital away until he recovers. If he loses another 5 million, he’s out. It’s a bit more complex but that’s the gist of it