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Mat001


Total Posts: 33
Joined: Aug 2014
 
Posted: 2015-08-10 19:53
Some say algo trading with stops compromises performance and it is best to not to use stops.

Any good reference on this? Any experiences. I am ready to employ an algo in real trading that is long/short and I wonder whether to use stops or not. Backtest shows no significant degradation of performance with stops of 2% of equity.


svisstack


Total Posts: 287
Joined: Feb 2014
 
Posted: 2015-08-10 21:01
Please read this in whole range and all your questions should be answered

http://www.nuclearphynance.com/Show%20Post.aspx?PostIDKey=174394

Time well wasted.

Mat001


Total Posts: 33
Joined: Aug 2014
 
Posted: 2015-08-10 21:23
Thanks for the link. Good discussion there.

goldorak


Total Posts: 979
Joined: Nov 2004
 
Posted: 2015-08-11 06:56
And next time do a search FIRST.

If you are not living on the edge you are taking up too much space.

Mat001


Total Posts: 33
Joined: Aug 2014
 
Posted: 2015-08-11 14:07
@goldorak, Yes, Sir. Next time I will.

If I understand correctly based on my limited experience with finance, you are against stops and you have some valid reasons for that, some of which you based on GBM. If you have some time, can you briefly explain for starters like me? I would appreciate.

Do I understand correctly that for NOT using stops, an algo must be long/short? What about long-only algos?




TSWP


Total Posts: 358
Joined: May 2012
 
Posted: 2015-08-18 18:10
Mat,
You can't come up with a question like this, is too generic.

Depending on your strategy stops will be more or less useful and generally speaking not having a stop means that you will take any loss, as big as it could be, even a burn-your-account-to-zero loss, even if it takes one year or more to do so (think Bear Sterns - was it helpful or not to have a Stop Loss at one point? or was it better to hold until it collapsed to almost no value?).

On the other hand, having a stop is no guarantee of protection, this has been debated before and for sure a stop is not an insurance, if you want an insurance maybe you should try options.

If you find your strategy works great without stops, and if you are SURE that no market scenario can inflict you a loss so big that you will never walk again... then go without stops.

Only you know the answer, nobody else does.

"I couldn’t write programs […] I wouldn’t have done well in an Olympiad or a math contest. But I like to ponder. And pondering things, just sort of thinking about it and thinking about it, turns out to be a pretty good approach." - Jim Simons
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