# Questions tagged [stop-loss]

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### Cost of Hedging and Ito Calculus

In Dynamic Hedging by N. Taleb, at pag. 198, is presented a stop loss strategy that potentially could replicate an option. In particular, suppose one sells a call on an underlying and hedge it with a ...
• 219
32 views

### Probability distribution function for boundaries on brownian motion

What would be the probability distribution function for brownian motion with 2 boundaries ie a stop loss and take profit. The process is a standard brownian motion. However at values a and b any ...
76 views

### Deriving probability of hitting stop loss given annual return and Sharpe

Suppose I have a strategy with a mean return and defined Sharpe. Given a preset stop loss, I want to calculate the probability of the stop being hit. In the example below I use the following ...
• 141
103 views

### Return distribution with stop loss

Assume there is a investment with payoff going like a brownian motion, i.e. $dS=\mu dt+\sigma dW$, for simplicity, setting $\mu= \sigma=1$. At $t=1$, the payoff distribution is $P=Normal(1,1)$. If we ...
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342 views

### Strategies for trading on a forecast

I have been experimenting with multiple methods of forecasting the daily high and low for a certain security. I have found a very basic ensemble of several common forecasting approaches is, well, ...
• 111
613 views

### Calculate optimal stop loss from MAE or MFE

I have a list of trades. For each trade I have the following information Entry date and time Exit date and time P/L MAE (Maximum Adverse Excursion, sometimes called within trade drawdown) MFE (...
• 103
63 views

### What is meant by "a stop order may trigger another stop order?"

I came across this phrase today in my studies without examples, so I am unclear what the meaning is. This is in the context of stop market orders. Is it referring to the scenario where, say, some ...
112 views

### Is this an Example where Maximum Adverse Excursion (MAE) is not useful for a Stop-Loss?

Below is an attached screenshot of a scatter plot of a long position Percentage Return of a Asset Security on the Y-axis, and the Maximum Adverse Excursion (MAE) Percentage on the X-axis. Green dots ...
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