A Stop-Loss on a Price That Comes Back

stop-loss level half-life of a deviation

Where the price spends its time (it reverts to $1.00 with a typical swing of 10¢; a cent to buy and a cent to sell) · the stop · repeated trading · one round trip

repeated trading: buy between

repeated trading: sell at

trades that end at the stop

repeated trading: worth today

one round trip: buy between

one round trip: sell at

one round trip: worth today

the stop, below the mean

The model

Published: one round trip with a stop-loss (Leung and Li, 2015), and repeated trading without one (Zervos, Johnson and Alazemi, 2013). Ours: repeated trading with a stop, the solver, every number on this page (5 half-lives × 15 stops, each checked against a finite-difference solution with the stop as a forced sale) and the share of trades that end at the stop.