“I’d feel more comfortable if I had a stop-loss in place.” Yes, that is the case for a stop and it is a fair one. If you are out at 5%, no single position can keep taking money off you week after week. I tested it on a
- Long mean reversion system
- Trading SPY 0.00%↑ 500 members
- From 3 January 2000 to 7 August 2026.
- Backtest in-sample (2000-2012)
- Backtest out-of-sample (2013-2026) With no stop the system returned 8.22% a year and its worst drawdown, the deepest fall from a peak, was -18.63%. Adding a 5% stop to the identical entries dropped the return to 1.05% a year and took the worst drawdown to -41.78%. The stop was the only thing that moved. Below are twelve stop levels, the two decades on their own, and what became of the 911 trades the stop cut short.