Most traders (and investors) hate to give back recent market gains and at the same time want some sort of hedge against the drawdowns accompanying the recent market mini-crash. Option spreads is one approach to this end but in the M3 model we use both an Auto-Stop, which filters out trades with a low probability of follow through, and discretionary stop-loss stops which seek to retain gains and mitigate significant losses. We could also add a trailing stop but that feature is really most appropriate for day traders. The discretionary stops that we use are simply to establish a risk benchmark and, since we are not investment advisors, are shown simply as one example of a risk containment strategy. In live market conditions traders can apply the posted discretionary stops, modify or ignore them completely. Actual trading returns will vary accordingly. The Auto-Stop feature is turned on by default and its filter will always be factored into the posted model returns.
Here are the 3 month returns for various M3 risk models>>>>>>>
Also see previous post on this
subject.
Returns with both Auto-Stop and discretionary stops exercised.
Returns with only Auto-Stop on.
Returns with no Auto-Stop and no discretionary stops,
