Stop Loss Placement? (Probability & Statistics)

Hello traders,

Hope we are all doing well, first off...

I promise this is not simply "where do I put my stoploss" typical thread.


I have a statistic I found and would like some help determining stoploss placement.


Here is the probability from my statistic,

Probability of going UP: 62%

this is on a candle stick..

from the candle sticks open it goes up(trends): 25 pips on average

from the candle sticks open it goes down(pulls back): 7 pips on average

Probability of going DOWN: 38%

this is on a candle stick..

from the candle sticks open it goes up(pulls back): 9 pips on average

from the candle sticks open it goes down(trends): 25 pips on average


(so what I'm saying is that there is a 62% chance it will trend up.. when it trends up the average pull back is 7 pips and the average distance in trend direction (up) is 25 pips )




I am concerned that the average pullback is probably not a good place for my stoploss.. because that is just an average... if anyone needs the max and min pull back I could grab that data as well..

So I ask for advice where the optimal place to put a stop is based on my stats. (I guess knowing the optimal take profit I should ask as well.. but one thing at a time)




Thank you appreciate your help!


PS: if someone wants to know where my edge lies I may consider sharing but only with those who provide a solid answer to stop placement. Thanks again.

I do not trade with stops personally but if I have your kind of statistics then I will do the following:

Add the spread to the stop loss and place the stop there.(ie 10 pips if spread is 3.) For take profit, substract the spread and place the stop there. (ie 22 pips)

Although you have another favourable statistics for the direction it will go I will disregard that and take it as extra insurance.

With the above alone even if chances are 50:50 you still earn more than your share in this market.

However, a word of caution. It sounds too good to be true. You may want to start with initially small lot sizes.

King.

Hello newyear498,
im not a math/stats guy, but i'll try & think of something...
- this stat is based on how large a sample?
- can u share the max&min. pullback?
- how do u manage such trades? do u always exit greater than 25pips (avg trend move)?

regarding your concern...
if avg. pullback is 7pips, maybe u can try & add (arbitrary) 5 pips PLUS spread.
but i think the better solution is u get a larger sample of trades. this will/may give u a better, accurate & tighter stop loss... plus added confidence (allays your concern). another approach (trade mgmt.-wise) is do multiple take profits (eg. TP1 25pips, TP2, etc)

hope this helps & make sense

I can solve it for you but I need the dataset. Min/max/averages have little value because they don't accurately identify the degree and frequency of deviation from the average.

PS- I dont need prices (or even the pairs) just the pip info. And it would be best if they were linked.. ie- item 1 pullback of X and trend of Y)

some good ideas.. maybe multiple TP's sounds good... the sample size is is over 8000 btw (with multipul small sample periods from variable sizes)



I'm not sure what the max / min pullback is I did not collect that data but if it is required to make the proper stop loss I can run the test again with a few lines of code to collect it.


I have not started trading this edge.. so I do not exit it after 25 or whatever since I never traded it yet.. I came up with a theory over the weekend based on some economical ideas and cycles.. so this is a fresh idea and stat

I'm not sure if I understand what data you are asking for.. are you asking for each trade individually?

ok I think I get you actually.. how much of a sample size do you want? the data is pretty similar for many sample sizes which I find pretty amazing.

Thanks,

PS: if you could teach me how you solve it also that would be great for my future adventures

yeah I actually had a stat which is a 50/50 but the average of it going up was it going 4 times higher than when it goes down... pretty sweet 4-1 stuff..


anyways I think what darkstar said about deviation is what I was forgetting and also do not know how to calculate

the average is what would get me killed

SAMPLE SET

I made the sample set much smaller down to 100 samples..
(you don't have to compute this data for me.. feel free to explain how to compute I'd rather not waste your time... also any advice where to place my take profit?)

It appears you are using standard deviation to decide on my stoploss... I am guessing that about 2.33 would give a 1% chance of being hit.. is that a good idea? and I'm also guessing the average is good for take profit?

OK heres the data... slight change to averages

Trends Up: 61.5854%
Trends Up Avg Pips Trend: 14 pips
Trends Up Avg Pips Pullback: 5 pips

Item 1 pullback of 3 and trend of 20
Item 2 pullback of 2 and trend of 18
Item 3 pullback of 2 and trend of 12
Item 4 pullback of 1 and trend of 28
Item 5 pullback of 6 and trend of 13
Item 6 pullback of 14 and trend of 12
Item 7 pullback of 7 and trend of 6
Item 8 pullback of 1 and trend of 20
Item 9 pullback of 17 and trend of 14
Item 10 pullback of 19 and trend of 2
Item 11 pullback of 5 and trend of 32
Item 12 pullback of 1 and trend of 31
Item 13 pullback of 2 and trend of 20
Item 14 pullback of 11 and trend of 5
Item 15 pullback of 3 and trend of 10
Item 16 pullback of 1 and trend of 16
Item 17 pullback of 3 and trend of 19
Item 18 pullback of 9 and trend of 7
Item 19 pullback of 4 and trend of 27
Item 20 pullback of 6 and trend of 13
Item 21 pullback of 3 and trend of 19
Item 22 pullback of 19 and trend of 5
Item 23 pullback of 4 and trend of 20
Item 24 pullback of 12 and trend of 8
Item 25 pullback of 5 and trend of 17
Item 26 pullback of 8 and trend of 13
Item 27 pullback of 6 and trend of 9
Item 28 pullback of 8 and trend of 11
Item 29 pullback of 18 and trend of 11
Item 30 pullback of 6 and trend of 22
Item 31 pullback of 7 and trend of 13
Item 32 pullback of 8 and trend of 22
Item 33 pullback of 8 and trend of 11
Item 34 pullback of 5 and trend of 14
Item 35 pullback of 13 and trend of 10
Item 36 pullback of 1 and trend of 18
Item 37 pullback of 7 and trend of 13
Item 38 pullback of 15 and trend of 13
Item 39 pullback of 10 and trend of 13
Item 40 pullback of 1 and trend of 24
Item 41 pullback of 1 and trend of 15
Item 42 pullback of 8 and trend of 11
Item 43 pullback of 8 and trend of 3
Item 44 pullback of 4 and trend of 9
Item 45 pullback of 3 and trend of 12
Item 46 pullback of 10 and trend of 8
Item 47 pullback of 13 and trend of 6
Item 48 pullback of 7 and trend of 11
Item 49 pullback of 12 and trend of 3
Item 50 pullback of 6 and trend of 13
Item 51 pullback of 3 and trend of 15
Item 52 pullback of 12 and trend of 11
Item 53 pullback of 9 and trend of 7
Item 54 pullback of 2 and trend of 11
Item 55 pullback of 8 and trend of 9
Item 56 pullback of 4 and trend of 10
Item 57 pullback of 1 and trend of 11
Item 58 pullback of 1 and trend of 13
Item 59 pullback of 1 and trend of 17
Item 60 pullback of 7 and trend of 7
Item 61 pullback of 4 and trend of 9
Item 62 pullback of 1 and trend of 14
Item 63 pullback of 2 and trend of 12
Item 64 pullback of 6 and trend of 6
Item 65 pullback of 1 and trend of 6
Item 66 pullback of 3 and trend of 8
Item 67 pullback of 0 and trend of 35
Item 68 pullback of 0 and trend of 13
Item 69 pullback of 1 and trend of 13
Item 70 pullback of 4 and trend of 16
Item 71 pullback of 1 and trend of 15
Item 72 pullback of 10 and trend of 16
Item 73 pullback of 1 and trend of 27
Item 74 pullback of 4 and trend of 14
Item 75 pullback of 2 and trend of 20
Item 76 pullback of 5 and trend of 10
Item 77 pullback of 8 and trend of 4
Item 78 pullback of 2 and trend of 11
Item 79 pullback of 9 and trend of 20
Item 80 pullback of 7 and trend of 22
Item 81 pullback of 3 and trend of 15
Item 82 pullback of 5 and trend of 13
Item 83 pullback of 0 and trend of 15
Item 84 pullback of 1 and trend of 20
Item 85 pullback of 10 and trend of 18
Item 86 pullback of 2 and trend of 7
Item 87 pullback of 2 and trend of 15
Item 88 pullback of 8 and trend of 7
Item 89 pullback of 0 and trend of 16
Item 90 pullback of 0 and trend of 23
Item 91 pullback of 2 and trend of 5
Item 92 pullback of 1 and trend of 7
Item 93 pullback of 9 and trend of 11
Item 94 pullback of 1 and trend of 13
Item 95 pullback of 3 and trend of 16
Item 96 pullback of 0 and trend of 31
Item 97 pullback of 9 and trend of 19
Item 98 pullback of 2 and trend of 13
Item 99 pullback of 0 and trend of 23
Item 100 pullback of 0 and trend of 17