The numbers generated by our stop loss calculators are NEVER recommendation to buy or sell any securities. Stockdisciplines.com never makes recommendations to buy or sell securities. All results displayed by our calculators depend on entries made by the user. The user bears all responsibility for loss or gain as a result of using the data generated by our calculators.
Historical data for thousands of stocks is already within StopsXL. This calculator is intended to satisfy the needs of people who do not want to download new data every day. Instead, they can download a new updated copy of the calculator once a week on the weekend. The premise of this stop loss calculator is that while the True Range (TR) of a stock may have a significant change from one day to the next, the Average True Range (ATR) is likely to be much more stable over time. Also, the longer the period used in calculating the ATR, the more stable that ATR is likely to be. A 5-day ATR may have a significant change from one day to the next because of a big TR change in one day. However a 200-day ATR is not likely to vary much from one day to the next because a big change of the True Range in one day is averaged with 199 other days. Let’s assume that a stock varies by $1 every day for 4 days, but on the fifth day it spikes $4. While the True Range has jumped $4, the average for the 5 days will be $1.60. The ATR would have jumped only .60 because of that $4 spike. On the other hand, let’s assume that a stock varies by one point for each of 200 days. The ATR over that period would be 1 point. If on one of those days, the stock has a $4 spike, the average over the 200 day period would be $1.015, a change of only 1½ cents.
Stops XL computes the 7-day ATR, the 14-day ATR, the 21-day ATR, the 100-day ATR, and the 200-day ATR (more than 6.5 months). To make sure we do not use an ATR that is too small, let’s select the greatest ATR measured over all these time periods. The chances are that the ATR tomorrow will not be greater than the greatest of all these measurements. It is likely that the greates ATR of the coming week will not be grater than the greatest of the 6 ATRs we have measured. This cannot be guaranteed, but it is probability true. The thinking here is that an ATR arrived at in this way might be useful for more than a week for most stocks, though we provide weekly data updates. StopsXL includes a “Multiplier” function that enables the user to increase or decrease the impact of the ATR in the stop loss calculations, enabling the user to use his or her own judgment on how to “tweak” results.
The reality is that any ATR (regardless of how long a period is used in the calculation), could fluctuate from day to day (but less so as the length of time is increased), so this calculator should be viewed as providing an approximation of the maximum likely ATR. Therefore, given its purpose, it is not necessary to download new data or to get a new copy of the calculator each day. For example, the user can enter the symbol of a stock in cell D-1, and then enter into cell C-2 the number of days indicated in the black box. This will put the data for the stock in the light blue area. The number we are interested in is the one given under the “VA” heading. “VA” is the ATR times the “Multiplier.” The numbers under “Price-VA” and “Price+VA” are in reference to the price on the date of the last update. After the first day, simply enter the most recent High, Lose, and Close in the appropriate row in columns I, J, and K, respectively. Just remember that the application is making close approximations after the first day. Entering new High, Low, and Close data, does not change the number under “VA.” However, it does change the numbers under “Price – VA” and “Price + VA” in the light blue area. The numbers in the light blue area are always for the symbol you have entered in cell D-1. That number under “VA” is calculated and updated for the application once a week, so a new copy of the application should be downloaded weekly. Thus, the user only needs to take the most recent High, Low, or close, and subtract the number under the “VA” heading or “Price – VA” (for a stop loss) or add that number or “Price + VA” (for a stop order to buy or to close a short position). This is done automatically for the user in the light blue area when he enters the most recent High, Lose, and Close in the appropriate row in columns I, J, and K. Stops XL is updated weekly (by Saturday a.m. Pacific) or sooner, and is available for downloading by subscribers. We estimate that downloading a new copy of Stops XL takes less time than it would take to download new data for the application.
As with Stops, all price data is included and internal. The difference between StopsXL and Stops is that with Stops the user downloads a new copy each day and it always has fresh data. With StopsXL, the same data is used each day for up to 5 market days, but each day the last high, low, and close is entered manually (only for stocks of interest) in columns I, J, and K. For example, if a person wants to calculate a stop loss relative to the most recent closing price and he wants to use a 14-day ATR, he will enter the symbol in cell D-1 and 14 in cell C-2. He will also enter the most recent high, low, and close for that stock. Stops will do the calculating for him. He can “tweak” the number under “VA” by adjusting the multiplier. That is, using 2 for a multiplier would place the stop loss 2 ATRs below the closing price. The number under “VA” is added to or subtracted from the most recent high, low, or close for any stock under review. Instead of having to download fresh data every day, the user is given a variety of computations, including a 100-day ATR and a 200-day ATR. StopsXL determines the greatest ATR calculated for all five periods for all stocks. When a symbol is entered in cell D-1, StopsXL posts the calculated maximum ATR for that stock for easy reference. The user can then use the greatest ATR calculated for that stock (as displayed in the black box), or the ATR for any other calculated period in cell C-2. The Stop loss can easily be calculated relative to the most recent high, low, or close, as entered by the user.
StopsXL provides two very different ways to compute a stop loss and each of these can be “fine tuned” to reflect the user’s tolerance for risk. All you have to do is enter a few letters (“H,” “L,” or “C”) in cell C-1 to indicate that you want your stop loss calculated relative to the high, low, or close. For ATR calculations, you would enter ” “7,” “14,” “21,” “100,” or “200” in cell C-2 to indicate that you want your stop loss calculated on the basis of the last 7 days, 14 days, 21 days, 100 days, or 200 days. You would enter a number (usually between 1.000 and 4.000 in cell C-3 to “weight” the volatility measurement (volatility x 1.58, volatility x 3.25, etc.). Cell C-4 displays the day of month on which the data was updated, and data is always collected after the close of market. That is, if data were collected today after the close of market, and today is June 30, “30” would appear in Cell C-4. The name of the file reflects the date the file is created. So, if the file is created on 7/1/22 and Cell C-4 shows 30. you will know that the data was for 6/30/22 and that the file was created the next day. A difference would exist, for example, if closing data were used for Friday, and the new copy of Stops is posted on Saturday. Reference to the date is in two places to remind the user to update Stops weekly.
The above image resembles the appearance of Stops (no longer available). However, there are two differences between Stops and StopsXL. The above image has a black box with yellow lettering. That box displays the largest ATR range calculated. First, StopsXL calculates the 7-day, 14-day, 21-day, 100-day, and 200-day ATRs. Then, it posts the ATR that has the largest range. The information in the black box is for whatever symbol that you have entered in cell D-1 (here it is INTL). Then you can enter into cell “C-2” the number of days indicated in the black box and that will cause data for the stock and ATR indicated to appear in the light blue strip (after you have entered the most recent high, low, and close for Intel in Cells I, J, and K for that stock. Another difference between StopsXL and Stops is that the area just to the left of cell “C-2” reads “For ATR, enter 7, 14, 21, 100, or 200” whereas Stops does not include “or 100 or 200.” Here is the rationale.
Generally, the best data is fresh data. However, fresh data requires maintenance on a daily basis. Maintenance can be expensive and may be time-consuming. Also, there are those who do not want to download new data every day, nor do they want to manually enter 20 or 30 days of data for each stock being tracked. For them, StopsXL may be the best solution. It computes the ATR for five different time periods and displays the result for each. It then finds the largest ATR range and posts the identity of that ATR in the black box. The idea is that it is important to avoid using an ATR that is too small (in order to avoid being stopped out of a position unnecessarily). By getting a reading on 5 time periods (long and short), the user can select the one that he thinks will serve the best over the next few days without need of changing it. There is some risk here because the ATR of any stock (for any time period) will fluctuate a little. If the average ATR for a $30 stock is $1/day, a surge of $10 in one day will change the 200-day ATR from $1 to $!.045 (4½ cents). The Average True Range over a 6-month period is not likely to vary much from day to day. However, the greatest ATR may actually be the 7-day ATR or some other ATR rather than the 200-day ATR. By using the greatest ATR of the five periods covered, a person reduces the risk that a stop loss will be triggered prematurely. In addition, he can use the multiplier to increase or decrease the weight of the ATR. Whatever he decides to do, the basis of his calculation is derived from the measured volatility of the stock itself over 5 different time periods. We recommend that users get a new Copy of StopsXL once a week (updates are based on Friday’s closing data).
As you can see in the above illustration, the user can enter a stock’s symbol in cell D-1, and the desired data will appear in the light-blue area. Alternatively, he can simply scroll down the list to find the stocks of interest. All stocks on the list will show data generated by the settings entered by the user. You just have to remember to enter the most recent high, low, and close in the spaces provided. In the row of each stock, the high, low, and close is entered in columns I, J, and K respectively.
In the Goldenrod colored strips, you will see “Price,” “VA,” “Price-VA,” and “Price +VA.” The letters “VA” stand for “Volatility Adjustment.” If a stock has been in a downtrend and an investor is wanting to determine when a reversal has taken place, he might want to calculate a buy price by using a multiple of the volatility measurement. Instead of calculating the price for a stop order to sell, he may want to calculate a price for a stop order to buy. Also, there are times when short sellers will want to add the VA rather than subtract it. In these situations, the “Price + VA” column will be useful. Those who use the tool only for calculating stop loss prices for long positions will focus on the “Price – VA” column.
The above image shows the tool configured for ATR stop losses. These are stops based on Wilder’s original formulas for Average True Range. StopsXL does not modify or corrupt Wilder’s methodologies or use the shortcuts often used by others. It uses his procedures of calculation as he intended. Note the gray box in cell G-19. If the user enters an “S” in that box, StopsXL will re-configure itself to generate data based on the standard deviation. Entering an “S” in that box changes the top left corner from ATR Stops to SD Stops.
Standard Deviation Stops
With the “S” in cell C-19, Stops will ignore any entries in cell C-2. All computations for the standard deviation will be based on 50 days of price activity. Stops will also show you the data used in computing stops. When the user scrolls to the right, he can view the following data.
The name at the top of the image (Stops-5.22.22) reveals the date the file was created (5/22/22)
In the above image, you enter the latest high, low, and close prices for the stock of interest in the columns labeled “High,” “Low,” and “Close.”
The user can see the ATR for the 200-day, 7-day, 14-day, 21-day, and 100-day periods for all the stocks in the Stops database. He can also see the standard deviation of the Wilder True Range and the latest computation of the True Range. Pivot point data does not show in the above image because it is to the right of the above image.
Many investors rely on “eyeballing” charts to decide on a stop loss price (this can be quite sloppy and result in more than necessary loss) or on making their computations manually. Any manual calculations are likely to be very rudimentary because the more sophisticated computations are very time-consuming. Rudimentary stop losses are usually the first to get triggered unnecessarily because of market “noise.” These stop losses may also give up far too much money when they are triggered. Even one excessive loss of .65 on a 500 share trade would cost more than the price of using the tool for a full year (when we charged a fee). Multiply that by the number of positions incorrectly stopped out in a year to get an idea of the potential savings possible with StopsXL. The beauty of StopsXL is that it provides the more sophisticated stop loss calculations without you having to know how to write volatility measurement formulas and without you having to learn arcane program syntax. You simply enter instructions for Stops and Stops will do the rest based on the simple instructions you give it.
Most successful investors prefer to place their stop loss just below a recent minor low. A minor low suggests that there is support at that level. An alternative approach is to place it under a significant trendline. However, there are times when the trader can find no recent minor lows or trendlines to use as a reference. At such times, a “mathematical stop loss” can be very useful. StopsXL can make computations that are based on statistical probabilities. That is, measurements of dispersion like the standard deviation enable a person to adjust the probability of the stop loss being triggered. Thus, by applying the appropriate multiplier to the standard deviation portion of the equation, a person can set the stop loss so that it is unlikely to be triggered because of the normal volatility of the stock within 50 days, 100 days, or whatever.
StopsXL has a Multiplier function (cell C-3 in the first two images above) by which you can adjust the number of standard deviations or ATRs that will be used when the stop loss is computed. This tool can be used to find optimum stop losses. The key is to use a stop loss that is as close as possible to the current price (to minimize loss if the stock suddenly plunges) but that is not so close that it is likely to be triggered by normal volatility over the expected holding period of the position. When a stop loss is triggered, it should be for a good reason. There will always be some occasions when a stock will have a downward spike, trigger any reasonable stop loss, then climb to a much higher level. It is impossible to completely eliminate such occurrences. Though they cannot be eliminated, they can be made far less likely. StopsXL is a flexible and easy-to-use tool for generating stop losses shaped by the user to meet his or her own trading needs.
Fibonacci Retracement Levels
It is often difficult to find a good entry point when a stock is moving up strongly. Traders who expect a stock to continue in a strong advance often buy a stock on a pullback to just above a Fibonacci retracement level and place a stop just below it. If that support does not hold, they will be stopped out at a price only a little below their cost. StopsXL makes it easy for you to determine Fibonacci levels. It should be mentioned that the ATR and standard deviation stop losses are far more reliable than Fibonacci stops. However, Fibonacci levels can be useful for traders focusing on very short-term price movements. As explained above, they can also be useful for determining entry points. To generate Fibonacci retracement levels, enter the high and low prices of the stock’s most recent significant move in the boxes provided. Various Fibonacci levels will be displayed. Calculations are displayed to 4 decimal places. Stops should be below support rather than exactly at or above it for a security in an uptrend. Most traders will place their stops at some distance below the calculated levels. The amount of “cushion” a trader uses will generally depend on tolerance for risk, time horizon, and the particular trading discipline used. For a security in a downtrend (one you have sold short), you would reverse your procedure. That is, the stop should be above the Fibonacci resistance level if you have shorted a stock in a downtrend. In a downtrend, the lowest price reached in the current downtrend should be placed in the “High” box (as illustrated above) and the highest price reached before the downtrend started should be placed in the “Low” box.
The pivot point is a recent addition to the data provided in StopsXL. A pivot point is a price level that is used by traders as a predictive indicator of market movement. A pivot point and the associated support and resistance levels are often turning points for the direction of price movement in a market. Prices tend to swing between two levels. For example, if a price is right at the first level of support (“Support 1”), the probability is that it will move back toward the “pivot point” These levels are very weak, and have most relevance for intra-day action (day-traders). In an up-trending market, the resistance levels may represent a ceiling level in price above which the uptrend is no longer sustainable and a reversal may occur. In a declining market, the support levels may represent a low price level of stability or a resistance to further decline. Pivot points were originally used by stock exchange floor traders in setting key levels. Before the market opened, floor traders would calculate the pivot points for the day. With these pivot points as the base, additional calculations were used to set support 1, support 2, resistance 1 and resistance 2. These levels could then be used as trading aids throughout the day. The resistance levels are where sellers are likely to enter the market, depressing prices. Therefore, it is significant if a stock can push its way through the selling pressure. It takes buying demand to push shares higher through levels at which sellers are waiting. Likewise, the support levels are where buyers are likely to enter the market, exerting upside pressure on prices. Therefore, it is significant if a stock declines through the buying pressure. It takes significant share selling for shares to continue dropping, even through levels at which buyers are waiting.
If you scroll to the right in StopsXL, you will see the following.
Where S1 and S2 are the first and second levels of suppot, and R1 and R2 are the first and second levels of resistance. The pivot point is located in column W. However, it is not necessary to scroll to the right and look up the pivot data for each stock. When a symbol is entered in cell D-1, the pivot point data for that stock is automatically shown in Cells G-41 to G-51.
If an incorrect symbol or if no symbol is entered in Cell D-1, then there will be no data in the Pivot Data Module of StopsXL. Where the blue numbers are located in the pivot box, there will be blank spaces.
1. There is within StopsXL all the data needed to generate stop losses for most stocks traded on any U.S. exchange.
2. The management of a list of stocks that will be tracked by the calculator is eliminated, because it is not even necessary for the user to add stocks to or delete them from a list for tracking purposes. Virtually all stocks traded on a U.S. exchange are included in each copy of StopsXL. The user can either scroll down the list of stocks or he can simply enter the symbol of the one for which he wants the data. If a stock is not included in Stops, the user can email us and ask that it be included. We only ask that the stock be actively traded on a U.S. exchange, and that it is included in the Reuters 8,000+ stock database.
3. Stops will show stop loss placement relative to the high, low, or close, and the user can apply a virtually unlimited range of weightings to the volatility measurement.
4. Stops can calculate for long or short positions.
5. Stops can calculate Fibonacci retracement levels and pivot point supports and resistances.
6. We no longer tie StopsXL to a single computer of the user. If the user has two computers, he can use StopsXL on either or both. StopsXL can be used on any computer that has Excel 2003 (or later) installed on it.
Various ATRs Illustrated
In the following illustrations, the red line rises and falls with the stock. In actual practice, stop losses should only be raised as the stock rises. They should never be lowered. It is always at the highest level reached since purchase. When the stock declines, the stop loss does not. However, if we did that with the illustrations, the red line would go flat or disappear the first time the stop is triggered. This way, you can imagine buying at any point on the charts.
The True Range is the largest of the four following calculations:
Most recent day’s high minus the most recent day’s low
Absolute value of the most recent day’s high minus the previous close (see “A” below)
Absolute value of the most recent day’s low minus the previous close (see “B” below)
Absolute value of the most recent day’s high minus the previous close (see “C” below)
Absolute values are used because direction (+ or -) is not important. Wilder wanted only to calculate the distance between two points.
From the above, you can see that the ATR is a very conservative measure of the average change in price from one day to the next. What we mean is that the ATR does not take the actual change in closing price each day and average those changes. Instead, the ATR is determined by computing the maximum of several ranges from one day to the next. This range is generally greater than the actual change in closing price and it factors in any price gaps from one day to the next.
To calculate a 14-day Average True Range (ATR), for example, a person would make the above calculation for each of the most recent 14 days of price action and then average those computations. The “normal” ATR calculator would require that you enter the date, high, low, and close for each day of the last 14 days for each stock. Our calculator does not (except for the high, low, and close for the last day only), because the required data is already “built-in” when the calculator is downloaded each day.
Our Stops calculator uses the same approach to data “smoothing” as that specified by Wilder’s formulas and procedures. Many ATR calculators use a simplified smoothing approach. People get used to using shortcuts, then they incorporate those shortcuts in the calculators they create. The procedures they use are not the ones recommended by Wilder. This is a generalization. Some calculators may actually use Wilder’s mathematics and procedures. Because some people looking for a stop loss calculator end up with a tool that does not strictly follow Wilder, we make a point of the fact that Stops does not use shortcuts or a watered-down approach. Our calculator can also calculate stop losses by using the standard deviation of Wilder’s True Range. Its standard deviations are based on 50 days of data. You do not have to know how to make these calculations because Stops provides the calculations for you.
The following are some of the features of Stops
1. Precisely uses Wilder’s original equations
2. It can compute standard deviation stops
3. You do not have to work with equations
4. You do not have to enter stock data for many days
5. You do not have to download stock data
The following paragraph was included in this description when we charged a fee. We have included it here to make a point, even though we are not charging people to use the tool.
A couple can get a 1-day ticket to Disneyland for $234. For that, they may get a few rides and have the privelege of buying things in the park. Once that money is spent, it is gone. On the other hand, paying to use StopsXL for 6 months costs much less, and it can be used to increase your assets rather than diminish them. StopsXL has the potentential to save the user far more than its cost. Think of it this way. If you save only $1 per share on a single 500 share position by selling a little earlier when a stock begins a decline, you will save about $500. Hypothetically, you could multiply that by the number of positions in your portfolio. Also, when you replace those positions, there is the possibility of saving on the new positions as well. Of course, we cannot guarantee that you will save anything on any position, because stock behavior cannot be predicted accurately, and individuals will vary in how they use StopsXL.
The page the following link takes you to will be brief, but at the bottom is a link to a much more detailed description. Go to Stops