012: Ernest Chan talks quantitative trading, momentum, stop losses, minimising drawdown and maximising returns, automated trading and competing with the big firms
Better System Trader
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Stop Losses in Momentum Sages
Stop loss is a very reasonable and felogical device to use in momentum sages. However, stop loss is not logical in a meanvorning sagy. If you believe that the prizes, youlessey, you are the prize, are dropping, and you enter into a long trade, you expect the prize to go up, but instead it goes on further. A stop loss does not make any sense for a minvering stratge. But how would we know that the good, good looking minventagy that we are pactesting now is not one of those that will crash in the future? We don't so there's always a possibility that some percentage of the strategy that seems
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