Date of this Version


Document Type

Journal Article

Publication Details

Accepted Version.

Vanstone, B. (2008). Do initial stop-losses stop losses? JASSA: The Finsia journal of applied finance, 4, 5-8.

Access the publisher's website.

2008 HERDC submission. FoR Code: 0199

© Copyright JASSA, 2008.

This article is reproduced with permission from Finsia- Financial Services Institute of Australasia.


A great many traders use stop-loss rules in their everyday trading. In addition, during periods of high volatility, many traders attempt to protect their downside by moving their stops closer to the price action. However, there appears to be little real justification for doing this. There is a shortage of evidence that demonstrates that stops are actually providing the benefits that traders believe they are. This paper is an empirical study of the use of stops within a defined trading strategy. The methodology used within this paper can easily be ported to any individual traders’ strategy. In the specific case studied in this paper, the results suggest that initial stops degrade long-term portfolio performance.



This document has been peer reviewed.