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real world stops and risk reward ratio.

  #11 (permalink)

south africa
 
 
Posts: 170 since Dec 2018

This is the best thread I have ever found on stops. Every time I read it I found something new and interesting (keep in mind Nuclear Phynance sorts the thread backwards for some annoying reason)
Nuclear Phynance

"The concept is very seducing in itself: it looks like you might be able to cut-off tails of your distributions. However they always omit to mention that you have an uncertainty on the stop-loss itself, a P&L distribution of its own"

"If you need a stop, your trade is too big"

Those two quotes really changed my trading.

If you buy a call options you don't use a stop. You plan for what happens if the option expires worthless before you make the trade and size the trade accordingly.

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