As of 08/03/2020
  Indus: 26,664 +236.08 +0.9%  
  Trans: 10,012 +16.91 +0.2%  
  Utils: 822 -8.43 -1.0%  
  Nasdaq: 10,903 +157.53 +1.5%  
  S&P 500: 3,295 +23.49 +0.7%  
YTD
-6.6%  
-8.2%  
-6.5%  
 +21.5%  
 +2.0%  
  Targets    Overview: 07/31/2020  
  Up arrow28,150 or 25,000 by 08/15/2020
  Up arrow10,600 or 9,400 by 08/15/2020
  Up arrow870 or 800 by 08/15/2020
  Up arrow11,300 or 10,200 by 08/15/2020
  Up arrow3,355 or 3,100 by 08/15/2020
CPI (updated daily): Arrows on 6/29/20
As of 08/03/2020
  Indus: 26,664 +236.08 +0.9%  
  Trans: 10,012 +16.91 +0.2%  
  Utils: 822 -8.43 -1.0%  
  Nasdaq: 10,903 +157.53 +1.5%  
  S&P 500: 3,295 +23.49 +0.7%  
YTD
-6.6%  
-8.2%  
-6.5%  
 +21.5%  
 +2.0%  
  Targets    Overview: 07/31/2020  
  Up arrow28,150 or 25,000 by 08/15/2020
  Up arrow10,600 or 9,400 by 08/15/2020
  Up arrow870 or 800 by 08/15/2020
  Up arrow11,300 or 10,200 by 08/15/2020
  Up arrow3,355 or 3,100 by 08/15/2020
CPI (updated daily): Arrows on 6/29/20

Bulkowski's Adjusting Stops Tutorial

 

Released 2/19/2020.

Adjusting Stops: Tutorial

Below is a slider tutorial for adjusting the location of stop loss orders. Captions appear below the pictures in red for guidance, so be sure to scroll down far enough to read them.

Below are the statistics from the tests, in case you're interested.

 

1 / 4
chart pattern
Here's the scenario. A double bottom, AB, appears in a stock you wish to trade. You place an order to buy the stock when price reaches C, the confirmation or breakout price. The target is D, which is the height of the pattern (C-A), added to the top of the pattern (C). Initially you place a stop loss order a penny below the low at A, which is the lower of valleys A and B. If price rises to E, which is halfway to your target, do you raise the stop to breakeven (C)? See the next slide for the answer.
2 / 4
chart pattern
Answer: No. Why? Tests show that raising the stop hurts performance. I show the numbers below the chart if you're interested. How about a new scenario, raising the stop but not as far. Would that work? The next slide describes that scenario.
3 / 4
chart pattern
This is the same setup as the last test. You buy the stock at F. Place a stop a penny below the lowest low (A). The sell target is D. When price rises halfway to the target, to E, do you raise the stop to midway up the pattern, C? The next slide provides the answer.
4 / 4
chart pattern
Answer: No. The statistics show that performance deteriorates if you raise the stop, even though you're only raising it halfway to the breakeven point. See the table below this chart for additional information.

Adjusting Stops

When price rises halfway to the target, should you raise the stop to breakeven? No. Why? Because the statistics suggest you'll hurt performance.

To test this, I used 463 stocks and found 2,333 double bottoms (found manually over the decades). I excluded patterns if the breakout date was in a bear market.

The following table shows the performance statistics for the benchmark using a stop located a penny below the lowest valley in the pattern with a target of the height of the double bottom added to the top of the pattern (the measure rule target). I compare the benchmark to tests showing the result of raising the stop to breakeven (the "Breakeven Stop" column), and raising the stop halfway up the pattern ("Stop Raised Halfway" column).

 Description  Benchmark  Breakeven Stop  Result  Stop Raised Halfway  Result 
Winning trades:1,7271,042Worse1,564Worse
Average profit from winners:11.84%11.98%Better11.98%Better
Profit per share:$4.54$4.86Better$4.61Better
Losing trades:5821,270Worse752Worse
Average loss from losers:11.07%3.05%Better7.82%Better
Loss per share:$4.75$1.33Better$3.36Better
Net profit per share:$2.17$1.45Worse$2.01Worse
Total net profit:$5,071$3,372Worse$4,688Worse
Win/loss ratio:74%45%Worse67%Worse
5% failures:17.7%15.6%Better17.6%Even
Hold time (days):5636Better48Better
BestWorstWorse

See Also

 
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My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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