As of 09/06/2024   Indus: 40,345 -410.34 -1.0%     Trans: 15,427 -190.44 -1.2%     Utils: 1,029 -7.87 -0.8%     Nasdaq: 16,691 -436.83 -2.6%     S&P 500: 5,408 -94.99 -1.7%	YTD  +7.0%   -3.0%    +16.7%    +11.2%    +13.4%	Targets    Overview: 08/14/2024     42,000 or 39,500 by 09/15/2024   16,200 or 15,300 by 09/15/2024   1,100 or 1,000 by 09/15/2024   18,400 or 16,650 by 09/15/2024   5,750 or 5,375 by 09/15/2024
Chart Pattern Indicator: on 9/3/24

As of 09/06/2024   Indus: 40,345 -410.34 -1.0%     Trans: 15,427 -190.44 -1.2%     Utils: 1,029 -7.87 -0.8%     Nasdaq: 16,691 -436.83 -2.6%     S&P 500: 5,408 -94.99 -1.7%	YTD  +7.0%   -3.0%    +16.7%    +11.2%    +13.4%
Targets    Overview: 08/14/2024     42,000 or 39,500 by 09/15/2024   16,200 or 15,300 by 09/15/2024   1,100 or 1,000 by 09/15/2024   18,400 or 16,650 by 09/15/2024   5,750 or 5,375 by 09/15/2024
Chart Pattern Indicator: on 9/3/24

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

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

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

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

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).

See Also

• Slider tutorials
• Slider quizzes
• 158 Additional quizzes (downloads)