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I have opened this thread to promote discussion on this controversial subject addressed by Dr. Bruce Vanstone in Stop Losses: Help or Hindrance?.
Please try to keep an open mind. We are all likely to benefit from a careful examination of our assumptions and motivation for using stop loss orders.
Do Stop Losses Really Work?
It would appear from Dr Vanstone's analysis, that trading the ASX top 200 using the 60 day EMA to plot buy/sell signals works best (historically) with no stop loss.
This makes perfect sense and would not see the need for a stop loss when a cross down of the 60 day EMA gives you the stop/sell point to exit. If one was wanting a tighter stop then surely a shorter EMA (say 30 day) for the exit signal would serve the same purpose.
I suspect the need for stop losses increases proportionately to the decreasing value of the market cap of a stock.
