What is Stop Loss?
A stop loss is an order placed in advance to close a position if price reaches a set level, which sets the planned loss on that trade at the stop price. The loss actually realised can be larger.
How it works
A stop can sit at a fixed distance from entry, just beyond a recent swing high or low, or a multiple of the ATR away so it adjusts to current volatility. A trailing stop moves with price as the trade works. Once the stop is set, the trade has a planned loss per unit at the stop price, which is what position sizing builds on. That is a plan, not a guarantee.
What it can't tell you
A stop does not guarantee the exit price. In a fast market or over a gap, the order fills at the next available price, which can be worse than the stop.
How Tickfloor uses it
Tickfloor's trade reads place the stop at a multiple of the ATR from entry.
Does it work as a strategy?
This is a concept more than a trading rule, so there is no single strategy to score. It matters for reading the results below.
Tickfloor's research desk has backtested 517 strategies, most against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs). After correcting for the 598 tests run (Benjamini-Hochberg), 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.
Common questions
What is Stop Loss?
A stop loss is an order placed in advance to close a position if price reaches a set level, which sets the planned loss on that trade at the stop price. The loss actually realised can be larger.
How does Stop Loss work?
A stop can sit at a fixed distance from entry, just beyond a recent swing high or low, or a multiple of the ATR away so it adjusts to current volatility. A trailing stop moves with price as the trade works. Once the stop is set, the trade has a planned loss per unit at the stop price, which is what position sizing builds on. That is a plan, not a guarantee.
What are the limits of Stop Loss?
A stop does not guarantee the exit price. In a fast market or over a gap, the order fills at the next available price, which can be worse than the stop.
How does Tickfloor use Stop Loss?
Tickfloor's trade reads place the stop at a multiple of the ATR from entry.