Stop Losses.

Stimulated by Snip.

Apologise for being long winded.

I have been thinking about Stop Losses for quite a while trying to find a strategy which will protect my gains as well as protecting me from unreasonable losses.

One of the problems like Snip suggests is triggering stop losses to early or to late and thereby reducing the possible overall profits.

But the important thing I am beginning to believe is protecting ones pot from decimation.

I use Comdirect for my Sipps because of the availability of their stop losses and, hopefully, if, or when I can organise my ISAs and PEPS holdings with Barclays will move them across to Comdirect for my peace of mind. Having suffered some of the pain of the Tech

Assuming I believe in my stock picking ability (Sometimes Questionable) I am thinking trying to modify my stop loss approaches as follows: -

Larger capitalization stocks.
At the time of purchase to initialise an immediate 10% stop loss on the purchase value of the stock. When, or if, the share moves to above to above 5% of purchase value to put in place a trailing stop loss of 2-5% . (Modified by value of holding.)

Hopefully, although the stop loss will be triggered sometimes when I would prefer otherwise, it will protect the gains made and protect me from myself and stop me allowing the price to roll down further before dumping.

Again, if the up going trend returns, I can always repurchase the stock having forfeited 0.5%, the narrow spread, dealing costs and a little pride. (The latter has never fed me.) Revise my opinion of the old one. Or move on to another stock or watch and wait.

Medium capital
Here influenced by often, increased volatility, smaller market size, larger spreads, at time of purchase to initialise an immediate 15% stop loss on the purchase value of the stock. When, or if, the share moves to above to above 10% of purchase value to put in place a trailing stop loss of 10% plus the half the normal high to low spread of the past 3months

Again, I may have to swallow my pride, but if I have a real belief in the stock and can find the cause of the movement I can repurchase the stock a little later, probably at greater cost than that of the same action in a larger capitalized company

Aim and Smaller companies
Here influenced by often, much more volatility, much smaller market size, much larger spreads (sometimes the spreads strike me as ludicrous but not without reason),
At the time of purchase to initialise an immediate 20% stop loss on the purchase value of the stock. When, or if, the share moves to above to above 15% of purchase value to put in place a trailing stop loss of 10% plus the half the normal high to low spread of the current month.

Again, I may have to swallow my pride, but if I have a real belief in the stock and can find the cause of the movement I can repurchase the stock a little later, probably at greater cost than that of the same action in a larger capitalized company

Looking back over the last 5-10 years I think these strategies may have saved me a lot of cash. (However, I may have lost the same total amount but spread smaller losses over more companies.)

I do look at charts, I may even have started to be influenced by them (a little), but would appreciate the thoughts of others on this topic. Especially, the Chartists, if the can illuminate on the indicators they choose to use and the reliability of the indicators, over the period of time they have used them.

I agree with Melnibone. I stopped using Comdirects stops when I was stopped out and the price continued up. A stop is an order to sell and as such Comdirect puts that order on their system and it can be snapped up by the market. When you look at it as an order to sell to the market at a bargain price you can see Melnibones point. Keep the stops 'mental' and use the Closing price not the intra day.
FWIW.

I understand some of the problem with stop losses on smaller companies. But I tend to use them when the share I am holding are in good profit and therefore prtecting the gains with a 2-5% drop outside previous lows. I am not ashamed to buy back in if it becomes obvious there is still good profits to be made and the fundamentals remain "sound". When I initially buy a share I tend to hope my judgement is right using fundamentals, expectations,charts to time and luck is reasonable, therefore tolerating sometimes a fall of up to 30% before dumping. But I still like stop losses and will tend to use them more, especially if I go away for a while.

I the past I have lost more from not selling than selling.