Stop Loss Settings and Strategy

GMCR Stop Loss Techniques

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Annualized Returns of Trading Strategies for GMCR

	Best Return	at Stop	Episodes	Length	Best +10	at Stop	-5 to -25
Buy and Hold	227.19 %		0.21	1201.00
Buy On Rise Hold	205.42 %		0.22	1138.32
Buy On Dip Hold	191.97 %		0.19	1291.95
Signal and Hold	248.92 %		0.17	1519.91
Stops Only	82.95 %	-0.24	1.00	415.11	82.95 %	-0.24	55.68 %
Sell Signal Trim Stops	49.56 %	-0.48	0.00	583.51	49.56 %	-0.48	39.87 %
Buy Signals	89.96 %	-0.24	0.00	541.40	89.96 %	-0.24	57.29 %
All Methods	65.12 %	-0.02	29.00	8.71	65.00 %	-0.48	36.97 %

The table above summarizes the results of the full range of stop-loss settings for GMCR when applied to several different mechanical trading strategies over every trading session during the past 10 years. These results for sliding stop strategies are obtained by resetting the stop loss after the weekly closing. The top lines of the table show results from several variations on the classic Buy and Hold strategy, for which the concept of stops does not apply. This much used strategy yielded 227.00 %.

The most basic flavor of the Buy and Hold strategy is tested by buying on every day of the period, then holding all the way to the present date. 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.

Our tests show it is generally better to buy on the dips rather than trying to follow the momentum of the market. But GMCR is an exception to that rule. 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.

All the buy and hold strategies suffer from a dangerous defect, as they do not cut losses. The statistics underestimate the harm of this defect, because market statistics are based on companies that survive. Doctors bury their mistakes, but Exchanges de-list them.

From the Report Dated 11/5/2010: For purposes of setting stop loss limits, the best setting is -24 percent when the stops for GMCR are reset weekly. This setting has produced a historical yield of 83.00 %. (The yield during the holding period is annualized to provide this figure).

How to set sliding stop limits for Green Mountain Coffee Roasters, Inc.:

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 Green Mountain Coffee Roasters, Inc.:

Predictions

Support and Resistance

Frequency Analysis

Japanese CandleSticks

Technical Oscillators

Moving Averages

Stratification Analysis

Politics and Prices

Classical Time Series

Bernoulli Analysis

Seasonal Trends

Back to GMCR 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
5/7/2001	8/14/2001	2.20	2.33	0.13	0.13	1	69
6/14/2001	8/14/2001	2.05	2.33	0.28	0.41	1	42
7/6/2001	8/14/2001	2.21	2.33	0.12	0.53	1	27
7/23/2001	8/14/2001	2.76	2.33	-0.43	0.10	1	16
8/15/2001	8/20/2001	2.20	1.94	-0.26	-0.16	1	3
8/20/2001	9/24/2001	1.94	1.82	-0.12	-0.28	1	20
9/10/2001	10/19/2001	2.07	1.64	-0.43	-0.71	1	25
9/19/2001	10/19/2001	2.01	1.64	-0.37	-1.08	1	22
9/26/2001	10/25/2001	1.80	1.54	-0.26	-1.34	1	21
10/11/2001	10/26/2001	1.84	1.47	-0.37	-1.71	1	11
11/26/2001	2/8/2002	1.91	1.71	-0.20	-1.91	1	50
12/19/2001	2/8/2002	2.02	1.71	-0.31	-2.22	1	33
1/22/2002	2/15/2002	1.82	1.57	-0.25	-2.47	1	17
1/28/2002	2/19/2002	1.90	1.47	-0.43	-2.90	1	14
2/12/2002	6/26/2002	1.62	1.49	-0.13	-3.03	1	93
4/12/2002	6/26/2002	1.60	1.49	-0.11	-3.14	1	52
5/3/2002	6/26/2002	1.84	1.49	-0.35	-3.49	1	37
7/23/2002	8/13/2002	1.46	1.21	-0.25	-3.74	1	15
8/13/2002	9/25/2002	1.21	0.96	-0.25	-3.99	1	30
8/14/2002	10/7/2002	1.01	0.91	-0.10	-4.09	1	37
9/16/2002	5/7/2004	1.07	1.44	0.37	-3.72	1	414
9/25/2002	5/7/2004	0.96	1.44	0.48	-3.24	1	407
10/25/2002	5/7/2004	1.05	1.44	0.39	-2.85	1	385
11/21/2002	5/7/2004	1.11	1.44	0.33	-2.52	1	366
1/15/2003	5/7/2004	1.12	1.44	0.32	-2.20	1	330
1/21/2003	5/7/2004	1.18	1.44	0.26	-1.94	1	327
1/29/2003	5/7/2004	1.11	1.44	0.33	-1.61	1	321
2/5/2003	5/7/2004	1.05	1.44	0.39	-1.22	1	316
2/11/2003	5/7/2004	1.10	1.44	0.34	-0.88	1	312
3/10/2003	5/7/2004	1.05	1.44	0.39	-0.49	1	294
3/28/2003	5/7/2004	1.35	1.44	0.09	-0.40	1	280
4/10/2003	5/7/2004	1.26	1.44	0.18	-0.22	1	271
5/30/2003	5/7/2004	1.27	1.44	0.17	-0.05	1	237
6/11/2003	5/7/2004	1.37	1.44	0.07	0.02	1	229
7/25/2003	5/7/2004	1.48	1.44	-0.04	-0.02	1	198
8/12/2003	5/7/2004	1.42	1.44	0.02	0.00	1	186
9/4/2003	5/7/2004	1.50	1.44	-0.06	-0.06	1	170
9/11/2003	5/7/2004	1.49	1.44	-0.05	-0.11	1	165
10/3/2003	5/7/2004	1.49	1.44	-0.05	-0.16	1	149
12/9/2003	5/7/2004	1.66	1.44	-0.22	-0.38	1	103
12/29/2003	5/7/2004	1.78	1.44	-0.34	-0.72	1	90
2/20/2004	7/14/2006	1.49	2.61	1.12	0.40	1	604
3/3/2004	7/14/2006	1.48	2.61	1.13	1.53	1	596
3/16/2004	7/14/2006	1.49	2.61	1.12	2.65	1	587
4/1/2004	7/14/2006	1.52	2.61	1.09	3.74	1	575
5/6/2004	7/14/2006	1.48	2.61	1.13	4.87	1	551
5/25/2004	7/14/2006	1.43	2.61	1.18	6.05	1	538
6/18/2004	7/14/2006	1.35	2.61	1.26	7.31	1	522
6/25/2004	7/14/2006	1.36	2.61	1.25	8.56	1	517
7/9/2004	7/14/2006	1.36	2.61	1.25	9.81	1	508
9/7/2004	7/14/2006	1.52	2.61	1.09	10.90	1	467
9/21/2004	7/14/2006	1.48	2.61	1.13	12.03	1	457
9/27/2004	7/14/2006	1.52	2.61	1.09	13.12	1	453
10/1/2004	7/14/2006	1.65	2.61	0.96	14.08	1	449
11/1/2004	7/14/2006	1.75	2.61	0.86	14.94	1	428
11/4/2004	7/14/2006	1.73	2.61	0.88	15.82	1	425
2/9/2005	7/14/2006	1.88	2.61	0.73	16.55	1	359
2/22/2005	7/14/2006	1.83	2.61	0.78	17.33	1	351
3/7/2005	7/14/2006	1.85	2.61	0.76	18.09	1	342
3/31/2005	7/14/2006	1.78	2.61	0.83	18.92	1	325
5/12/2005	7/14/2006	2.20	2.61	0.41	19.33	1	295
6/10/2005	7/14/2006	2.43	2.61	0.18	19.51	1	275
6/24/2005	7/14/2006	2.42	2.61	0.19	19.70	1	265
9/15/2005	7/14/2006	2.66	2.61	-0.05	19.65	1	208
10/21/2005	7/14/2006	2.85	2.61	-0.24	19.41	1	182
10/27/2005	7/14/2006	2.83	2.61	-0.22	19.19	1	178
12/14/2005	7/14/2006	3.01	2.61	-0.40	18.79	1	145
12/29/2005	7/14/2006	2.99	2.61	-0.38	18.41	1	135
3/14/2006	7/14/2006	2.96	2.61	-0.35	18.06	1	85
3/27/2006	7/14/2006	2.96	2.61	-0.35	17.71	1	76
4/27/2006	7/14/2006	2.88	2.61	-0.27	17.44	1	54
5/4/2006	7/14/2006	3.15	2.61	-0.54	16.90	1	49
6/21/2006	9/10/2007	2.75	6.50	3.75	20.65	1	306
10/16/2006	9/10/2007	2.97	6.50	3.53	24.18	1	225
11/27/2006	9/10/2007	3.53	6.50	2.97	27.15	1	196
12/13/2006	9/10/2007	3.67	6.50	2.83	29.98	1	184
2/1/2007	9/10/2007	4.81	6.50	1.69	31.67	1	152
2/27/2007	9/10/2007	4.11	6.50	2.39	34.06	1	135
11/26/2007	1/23/2008	6.64	7.48	0.84	34.90	1	39
12/7/2007	1/23/2008	7.40	7.48	0.08	34.98	1	30
3/4/2008	7/14/2008	6.58	7.76	1.18	36.16	1	91
3/10/2008	7/14/2008	5.61	7.76	2.15	38.31	1	87
5/8/2008	7/14/2008	8.50	7.76	-0.74	37.57	1	45
8/27/2008	10/7/2008	7.95	7.31	-0.64	36.93	1	28
9/10/2008	10/7/2008	7.34	7.31	-0.03	36.90	1	19
10/16/2008	10/24/2008	6.65	5.45	-1.20	35.70	1	6
11/10/2008	8/19/2009	5.41	18.54	13.13	48.83	1	194
12/15/2008	8/19/2009	7.22	18.54	11.32	60.15	1	170
7/20/2009	8/19/2009	22.34	18.54	-3.80	56.35	1	22
12/28/2009	4/29/2010	25.89	25.84	-0.05	56.30	1	84
5/17/2010	10/1/2010	23.51	29.57	6.06	62.36	1	96
5/24/2010	10/1/2010	23.42	29.57	6.15	68.51	1	91
9/8/2010	10/1/2010	33.58	29.57	-4.01	64.50	1	17
9/29/2010	11/12/2010	31.06	31.45	0.39	64.89	0	32

Total Session Units Invested 19434
Sessions In Time Span 2398 Avg. Units Invested 8.10

Unit Shares	Market Order Commissions	Stop Order Commissions	Profit
100	94 at $5.00	24 at $15.00	$5,659.00
100	94 at $30.00	24 at $30.00	$2,949.00
1000	94 at $5.00	24 at $15.00	$64,060.00
1000	94 at $30.00	24 at $30.00	$61,350.00

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