When do you cut your loss?

Just wondering when you guys dump a stock for a loss? When you're down 5%? 10%?

 

Hi,

I use 15% for my weekly method.
Its what worked best in my testing.

The initial stop for me was put there only for position sizing. The system works just as well without it.

ie. the initial stop is equal to the trailing exit.

 

You don't. The broker does it for you.

 

I trade futures.

I cut my loss whenever the stop is hit or whenever the price action changes to the worst case scenario prior to my stop being hit.

Mark

 

I find trading simulation software to be useful for answering this question. I find each individual security behaves differently. In general I find wide stops, perhaps in the 10 % to 50 % range, useful for my longer term trading style.

I also use a risk budget. Say I decide to stop a loss if my stock price decreases 10 %. If I have $ 10000 account equity and I choose to use 1 % risk then $ 10000 * 1 / 100 = $ 100 is my risk budget. The stock price decrease of 10 % represents a $ 100 loss. Say the stock trades at $ 20 / share. 10 % of $ 20 / share is $ 2 / share. $ 100 risk budget / $ 2 / share = 50 shares position size.

That's what I do. Other traders might have other stop loss, risk management and position sizing techniques.

 

When they start going after the order Im leaning on, or when my support/resistance level is broken... generally Ill give a stock 2-10 cents, though on some high priced stocks like BLK or ISRG I obviously have to give more room since the fuckin spread is more than 2-10 cents.

 

Can anyone post similar ideas applicable to option trades?

Thanks

 

Options are a little more riskier and flucuate alot (obvisouly), and I use a little wider stop, and sometimes just have a mental stop (of course that can bite you in the ass).

On intraday trades, I go for a 7% loss factor and usually I tend to only be in a options trade for 10-30 minutes.

For overnight and longer term trades (spreads, condors), I usually take off 50% of the trade if it falls more than 20%, and the rest if it falls another 15%.

 

Um you cut when there is a reason to

 

Options advice is impossible to provide on a general basis. Your options position could carry more or less risk than the underlying.

IF, you are asking about simple long calls or puts on an intraday basis, then I would recommend at least 10%, otherwise you'll get whipsawed out frequently.