“Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.”
Bruce Kovner
If you are using automated trading systems, the most appropriate approach for stop loss’ defining is applying Average True Range. For example you might use 1.5 times or 2 times 10 days ATR. It will depend on your trading horizon.
If you are proprietary trader (most likely trend follower), it is reasonable to put your stop loss 10-20 cents below major area of support. Again, the area of support would be defined by your investing horizon.
