The Best Stop Loss Strategy (Backtested)

Learn what a stop loss is and where to optimally place your stop loss. I backtest using ten years of data on the SPY, Sector ETFs, and S&P500 constituents to determine best stop loss placement.
✉️ Learn the secrets of legendary traders and investors:
bit.ly/4aCna7i
🔗 Follow along:
analyzingalpha.com/blog/stop-...
0:00 Introduction
0:37 What is a stop loss?
0:57 How does a stop loss order work?
1:45 Stop loss benefits & drawbacks
2:34 Stop losses to protect profits
3:58 Backtest results
4:20 S&P 500 results
6:12 Sector stop loss results
6:41 Equity stop loss results
7:10 Equity atr stop loss results
7:23 Backtest summary
9:43 Optimal stop loss
#trading
#technical-analysis
#stop-loss
Website: analyzingalpha.com
** All videos and code examples are subject to the disclaimer **
Disclaimer: analyzingalpha.com/disclaimer

[@AnalyzingAlphaTV]

What do you think? I hope you enjoyed as much as I liked creating it! (Reuploaded to fix sound)

[@chrishickman]

Would like to see this same test but for intraday only, meaning position is liquidated at the end of rth. I mean it's not hard to figure out buy and hold with no stop is best over a long timeframe for spy when it is in an unending uptrend over an infinite time horizon.

[@ErrorNotFound-jt2eq]

Hey man, since you asked for ideas: something I've wanted to see tested for a long time is the best backtested method to determine swing trend changes. There are things like Daryl Guppy's countback line, Ron Black's All Clear method, ATR "stop loss", etc. Would be really interesting to see which types of methods seem to nail changes the best.

[@AnalyzingAlphaTV]

Thank you for this! I added it to the list :-).

[@cungacunga]

I like your videos. Good explanation, very reasonable time frame, bringing it down to the point. Possibly the backtest result contain a lot more information and potential knowledge and it would be great if in future you could take a little more time to explain more deeply the graphs you are showing. When referring to the graphs it would help if the relevant part coudl be highlighted or if just a clearly visible cursor could provide a refernce to the verbal explanations

[@AnalyzingAlphaTV]

Thank you! I will do this in the future.

[@ericvowles]

So, best to not use trailing stop loss because just holding in an SP 500 index ETF outperforms trailing stops in your example?

[@AnalyzingAlphaTV]

According to the backtest, yes. Any risk mitigation using a generic stop loss on a generic entry will reduce returns.

[@user-xh3lr2oc4p]

I was surprised when you tested the ATR was it the default settings at 10 and factor 3?

[@AnalyzingAlphaTV]

Yeah, it’s interesting, right? Unless there’s an edge, setting a stop loss reduces compounding significantly.