Stop Loss when trading based on EOD data

[brettc4]

For those of you who decide to enter a trade based on EOD data, this question is for you.

When you place your trade and have your Initial Stop Loss price defined, do you sell on:

a) when the EOD close is below this price
b) when the EOD close is equal to or below this price
c) when the price during the day hits this mark

To follow on, when do you then sell?
a) during the day if you chose option c above
b) at the open
c) do you watch the open to see if price moves in your direction.

Thanks for your responses.

[Chorlton]

For those of you who decide to enter a trade based on EOD data, this question is for you.

When you place your trade and have your Initial Stop Loss price defined, do you sell on:

a) when the EOD close is below this price
b) when the EOD close is equal to or below this price
c) when the price during the day hits this mark

To follow on, when do you then sell?
a) during the day if you chose option c above
b) at the open
c) do you watch the open to see if price moves in your direction.

Thanks for your responses.

I'm sure you will get many permutations from other posters but for me I use B followed by B.

As I trade EOD, I avoid Intraday price action............

[weird]

From a strict risk perspective, particularly if your position sizing is based upon restricting losses to a specific amount, exiting immediately would be the obvious choice from this strict risk perspective.

My following comments below are more focused towards a 'long' term trading system, based on a medium size portifolio ...

Unluckily, exiting from extreme daily volatility hitting a stop (e.g. very bad news ?), and then cutting the trade short 'may' mean missing an otherwise great move if you held on.

This can be particularly difficult in the case, when an entry has quite strict entry parameters, making the initial entry criteria to be met again shortly by the same trade unlikely, so the trade, on a system such as this, means a very premature exit.

Hence why some may wait until the close before making the decision. This could be the eod or eow.

It appears, damned if you do, damned if you don't.

Particularly if you then decide to see a trade to the close, and it continues to head south ... why didn't I exit at the stop ?

Not for a moment , am I suggesting or questioning if signalled , we should not exit a position, the question was do I do it immediately, eod or perhaps eow. With choosing a longer term system, we are perhaps trying to be less sensitive to noise. Was this just noise ? Note, I am not trying to give any answers in this post.

I do not suggest any easy answers, only remark that you have asked an excellent question, and the only suggestion I make is that backtesting may help one be more confident in their decision on what to do, particularly, to then do consistently, once one has made that decision, if trading mechanically.

[tech/a]

From a strict risk perspective, particularly if your position sizing is based upon restricting losses to a specific amount, exiting immediately would be the obvious choice from this strict risk perspective.

My following comments below are more focused towards a 'long' term trading system, based on a medium size portifolio ...

Unluckily, exiting from extreme daily volatility hitting a stop (e.g. very bad news ?), and then cutting the trade short 'may' mean missing an otherwise great move if you held on.

This can be particularly difficult in the case, when an entry has quite strict entry parameters, making the initial entry criteria to be met again shortly by the same trade unlikely, so the trade, on a system such as this, means a very premature exit.

Hence why some may wait until the close before making the decision. This could be the eod or eow.

It appears, damn if you do, damn if you don't.

Particularly if you then decide to see a trade to the close, and it continues to head south ... why didn't I exit at the stop ?

Not a moment , am I questioning if signalled , we should not exit a position, the question was do I do it immediately, eod or perhaps eow. With choosing a longer term system, we are perhaps trying to be less sensitive to noise. Was this just noise ? Note, I am not trying to give any answers in this post.

I do not suggest any easy answers, only remark that you have asked an excellent question, and the only suggestion I make is that backtesting may help one be more confident in their decision on what to do, particularly, to then do consistently, once one has made that decision, if trading mechanically.

Weird has made some important points

I have found during testing that the actual timing of exit wether delayed or instant tends to average itself out.
Some save you money (Exiting immediately) and some cost you money( exiting quickly then it turns.)
OR
Some save you money (not exiting immediately,trade continues) and some cost you money (Should have exited immediately not on open,it doesnt turn).

[BentRod]

I use an "intraday" stop for my daily trades, and a "close" stop for my longer term weekly trades.

Weird did a great job with his comments above.

[GreatPig]

Seems to me that if all your backtesting has been done using EOD data only, then exiting during the day is not consistent with your backtesting, which can't do the same thing. The closest that I can see that you could come would be if your backtesting was set to exit same day (ie. zero trade delays) on close, and you did the same thing in real trading.

Still, as Tech mentioned, for a longer-term system at least it shouldn't make much difference in the end. If you run your backtests with different trade prices (eg. buy/sell on close, buy/sell at average, buy high/sell low, etc) you'll get an idea of how sensitive your system is to trade price.

Cheers,
GP