Squidgy Stop Loss?

I was thinking how useful something between a hard stop and a “mental” soft stop might be in these volatile markets.

Looking at a markets recent range might mean that you have to set your stop wider than you want - and so - with good risk management, taking a smaller position size.

No one likes to be stopped out because the price spiked through their SL before returning to the main range, at the same time a post-it about an exit level is a dangerous thing for those who suffer with the psychology and/or are not at the charts 24/7.

What about a stop that only triggers if the price is above/below for a whole period? Would be fairly easy to implement, does such a thing exist?

I dont think this is a good idea as price can move a lot in one period. If its moving against you that it hits your stop loss then you definitely dont want to come back to see price has carried on selling past what would have been your stop loss just because you were waiting for the period to end. Risk management is a part of trading.

But the period could be 5 mins or 4 hrs depending on the volatility. This would just avoid the long tails on the bars that trip the stop loss then go back to the body. Not suggesting to use such a thing all the time.

But you wont know what day the long wick is coming. So if normally your risk is 20 pips and that works but now because you’re doing this, your stop loss is 100 pips for an odd occasion or worse you’re waiting for end of period you may find you lose even more.

You could use the Donchian channel for this.

Just set the time period you want and it’ll display the highest high and the lowest low wihin that period.

For example, if you’re in a long position, you can set a stop where price falls below the lowest low within the past 10 bars.

1 Like

Thanks but I am not sure that’s what I am getting at.
More of a don’t trip the stop loss unless the price is consistently greater/lower for x amount of time (or even x amount of volume). What people refer to as “stop hunting” - real or imaginary.

Stop Loss should be used in long time frames. Having more spikes in the short time frame can hit stop loss. And if you give stop loss, the chances of getting hit are less.

A price doesn’t stay stable in one period. This is where you risk management skills come handy.

Understand the market momentum and work according to the trading plan. You have to take the trade from the swing so that the amount of loss will be less.