I have been giving some thoughts to a capital protection system that keeps you in the trade for the very long term yet avoids possible shocks...I remember seeing a chart of the dow removing the top 20 worst days and it showed very reasonable growth trajectory. This has had me thinking..
What if one sets a stoploss that triggers if the counter loses more than a given percentage in any one Day, Week or month depending on your research of what would constitute a outlyer indicating something big and unsual was in play.. ..
So if we use BP as an example ..If the top 100 worst perfoming weeks ment a loss of no more than 15%( thumb sucked number as I dnt have a fanvy bloomburg terminal)... thats were you set your stop as it clearly would indicate something was up...and one could use an intra day setting for big news events.
In this way it puts the loss into a context and further increases your understanding of your risk at any point in time. It removes the doubt and also that terrible delema when you know that a loss is on its way but currently your stop is sitting 25% below...so instead of sitting out the loss based on some arbitary number or some previousl buying support on the chart..it provides a clear an rational reason for an exit