Stop Loss Settings and Strategy

Trading Strategy for BTU

From the largest and most comprehensive Analysis Site on the web.

Annualized Returns of Trading Strategies for BTU

	Best Return	at Stop	Episodes	Length	Best +10	at Stop	-5 to -25
Buy and Hold	64.70 %		0.21	1190.50
Buy On Rise Hold	50.80 %		0.27	935.52
Buy On Dip Hold	58.83 %		0.34	732.84
Signal and Hold	96.90 %		0.14	1807.85
Stops Only	150.54 %	-0.21	1.00	239.29	150.54 %	-0.21	75.70 %
Sell Signal Trim Stops	170.73 %	-0.28	1.00	245.35	170.73 %	-0.28	65.19 %
Buy Signals	170.78 %	-0.21	1.00	299.61	170.78 %	-0.21	79.49 %
All Methods	209.27 %	-0.28	1.00	312.97	209.27 %	-0.28	46.79 %

The table above summarizes the results of the full range of stop-loss settings for BTU when applied to several different mechanical trading strategies over every trading session during the past 9 years. These results for sliding stop strategies are obtained by resetting the stop loss after the weekly closing. The concept of stops does not apply to the top few entries, which are various flavors of the well known Buy and Hold strategy. This much used strategy yielded 65.00 %.

Buy and Hold strategy in the most simple form is exercised by buying on every day of the test period, and holding the issue to the end . A less simplistic version might involve the momentum investor's ploy of buying only on rising prices, or the more contrarian tactic of buying on the dips.

Generally, we have found the Buy-On-Dip policy to offer better returns than the Buy-On-Rise. That is true in this case, indicating some of the benefit of betting against the crowd when investing. Sadly, neither of these policies were able to match the unadorned Buy and Hold in this somewhat unusual case. The best of these strategies trigger the buy on technical indicators.

The worst defect of the various Buy and Hold strategies is that they do not offer a methodology for cutting losses.

From the Report Dated 11/9/2010: At least from the standpoint of a single company strategy, the best setting over the past 10 years has been -21 percent for BTU when adjusting stops weekly. This setting has produced a historical yield of 151.00 %. (The yield during the holding period is annualized to provide this figure).

How to set sliding stop limits for Peabody Energy Corporation:

Stop loss limit orders would appear to be almost always desirable. But where to set the stop limit is controversial. Setting to limit too low may allow for too great a loss. But setting the limit too high may cause the trade to "stop out" prematurely, perhaps missing a rally and also incurring an unwelcome brokerage fee.

Two issues need to be settled in arriving at a stop limit strategy. The first is to determine the price to position the stop loss at a percentage below the buy-in price. The second is to determine a strategy for raising or sliding the stop to lock in gains without undue risk of prematurely "stopping out" on some insignificant dip in price.

Some would advise you to set the stops at what you feel to be an acceptable loss. However, "feeling" is an extremely misleading guide. These charts are the output of a "brute force" calculation giving results for every stop loss setting from one percent to fifty percent on every trading day of the past ten years.

The bars represent the annual percentage appreciation achieved for each stop loss setting. This percentage is numbered on the right (blue) axis. The purple line depicts the number of "stop outs" on average per year at each stop loss setting . Transaction costs directly relate to this number on the left (purple) axis.

These charts represent different strategies for "sliding" the stops to lock in gains. The first simply moves the stop up every day to the pre-determined percentage below the close price. The others move the stops up at the end of every week, and at the end of every month. Generally speaking, it seems better to move the stops less frequently than daily.

More than 70 Hi-Rez charts daily for Peabody Energy Corporation:

Predictions

Support and Resistance

Frequency Analysis

Japanese CandleSticks

Technical Oscillators

Moving Averages

Stratification Analysis

Politics and Prices

Classical Time Series

Bernoulli Analysis

Momentum Investing

Back to BTU Table of Contents

Technical Buy Signals and Trailing Stop-loss

Trailing stops set at -18.00 %

Start	End	Buy In	End Price	Dif	Total	Type	Sessions
9/19/2001	12/10/2001	6.09	5.54	-0.55	-0.55	1	57
10/3/2001	12/10/2001	5.04	5.54	0.50	-0.05	1	47
11/12/2001	2/5/2002	6.38	5.16	-1.22	-1.27	1	56
11/15/2001	7/19/2002	6.13	4.65	-1.48	-2.75	1	167
11/23/2001	7/19/2002	5.85	4.65	-1.20	-3.95	1	162
12/17/2001	7/19/2002	5.96	4.65	-1.31	-5.26	1	146
1/8/2002	7/19/2002	6.06	4.65	-1.41	-6.67	1	132
1/17/2002	7/19/2002	5.71	4.65	-1.06	-7.73	1	125
2/6/2002	7/19/2002	5.09	4.65	-0.44	-8.17	1	113
2/21/2002	7/19/2002	5.18	4.65	-0.53	-8.70	1	103
3/13/2002	7/19/2002	6.28	4.65	-1.63	-10.33	1	89
4/5/2002	7/19/2002	6.19	4.65	-1.54	-11.87	1	73
5/30/2002	7/19/2002	6.15	4.65	-1.50	-13.37	1	35
6/13/2002	7/19/2002	6.00	4.65	-1.35	-14.72	1	25
7/10/2002	7/19/2002	5.83	4.65	-1.18	-15.90	1	7
7/16/2002	7/23/2002	5.32	4.08	-1.24	-17.14	1	5
7/19/2002	4/15/2005	4.65	17.82	13.17	-3.97	1	689
7/22/2002	4/15/2005	4.41	17.82	13.41	9.44	1	688
8/21/2002	4/15/2005	5.66	17.82	12.16	21.60	1	666
8/27/2002	4/15/2005	5.57	17.82	12.25	33.85	1	662
9/27/2002	4/15/2005	5.47	17.82	12.35	46.20	1	640
10/16/2002	4/15/2005	5.07	17.82	12.75	58.95	1	627
1/24/2003	4/15/2005	5.62	17.82	12.20	71.15	1	560
7/29/2003	4/15/2005	7.01	17.82	10.81	81.96	1	432
3/17/2004	4/15/2005	10.21	17.82	7.61	89.57	1	272
11/28/2005	5/19/2006	34.01	51.15	17.14	106.71	1	119
8/10/2006	9/8/2006	43.11	35.25	-7.86	98.85	1	20
11/17/2006	1/3/2007	38.38	34.58	-3.80	95.05	1	29
1/3/2007	7/24/2007	34.58	39.50	4.92	99.97	1	139
8/8/2007	1/17/2008	41.05	48.78	7.73	107.70	1	112
10/4/2007	1/17/2008	44.52	48.78	4.26	111.96	1	72
8/19/2008	9/4/2008	60.48	50.64	-9.84	102.12	1	11
5/24/2010	11/9/2010	36.14	57.80	21.66	123.78	0	118

Total Session Units Invested 7198
Sessions In Time Span 2377 Avg. Units Invested 3.03

Unit Shares	Market Order Commissions	Stop Order Commissions	Profit
100	33 at $5.00	12 at $15.00	$12,033.00
100	33 at $30.00	12 at $30.00	$11,028.00
1000	33 at $5.00	12 at $15.00	$123,435.00
1000	33 at $30.00	12 at $30.00	$122,430.00

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