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Rules of Thumb: Bases, Stops

QuestionsCategory: QuestionsRules of Thumb: Bases, Stops
Mike Arluck asked 3 years ago

Hi Pat, Owen,
I am an MW newbie and already a huge fan of the service – kudos to both of you! My questions are around “rules of thumb” as they relate to investment evaluation, entry, and exit. I’ve tried cobbling these together from various locations on the MW site but was hoping to consolidate them into one resource for quick reference (happy to share with the rest of the squad when done :) Here goes….

  1. On average based on your personal history, what is reasonable target return for: a) a long, flat base, and b) a pullback setup? Are there any other trading setups worth noting that you cover?
  2. What do you personally use as your default stop loss upon entering a new position? How might this change based on other factors? FWIW I’ve heard you say that Bill O’Neill liked to keep his under 5%, preferably more like 2-3%, although stops up to 7% are cited in his books.
  3. At what point (% return) do you typically lift stops for existing positions? When do you look to add/pyramid (again % return thresholds would be really useful as benchmarks)
  4. Other than getting stopped out, are there other metrics/rules of thumbs you use to drive your exits?

Many thanks for all your great work!
Kind regards,
Mike Arluck
Port Washington, NY

1 Answers
Avatar photoOwen Staff answered 3 years ago

Hi Mike,
Pat made this video for you:
https://youtu.be/JNQHPZJ0Pw8