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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.
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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.
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