Metastock has 5 types of STOP lines built in. You can use them separately or jointly for each system. STOP lines enable you to close a selected position based on profit- or loss-related criteria. Example: using the "Maximum Loss Stop" will close a position if the loss on the transaction exceeds a predefined limit.

After the line of defense is broken, the position will remain closed irrespective of whether or not the rule triggering the closing of the position within the system is fulfilled. Both parameters defining the line of dense and the position (long or short) a given STOP relates to can be defined.

If a price gap is below the STOP level on a long position, Metastock will close the position on the opening of the next bar. If the next opening price is not available, the highest price will be used. If a price gap is below the STOP level on a short position, Metastock will close the transaction on the opening of the next bar. If the opening price is not available, the lowest price will be used.

STOP lines automatically reflect different commission amounts relating to the closing and opening of positions. Example: the "Maximum Loss Stop" will reflect the commission relating to the closing of a position and will close in the moment that the loss including the commission exceeds a predefined line of defense.

If two STOPs are generated onthe same bar, priority will be given to more conservative STOPs (e.g. STOPs which generate the highest loss). STOPs will be applied in the following order: "Maximum Loss", "Breakeven", "Trailing" and "Inactivity".






Breakeven
The line of defense of the breakeven point will close an open position once the equity held at the moment of closing falls below the initial equity (held at the moment of opening). In other words - the position will be closed the moment that the profit on transaction falls below 0.

It is necessary to ensure against automatic closing of a position once it is opened, resulting from the fact that an entry commission is deducted and at the beginning profit on any transaction will be lower than 0. Such protection is offered by the floor level. STOP will be activated only after profit on transaction reaches the predefined floor level.

The amount entered in the "Floor Level" window will be calculated using the method selected in the "Method" box (points or percent). The "Floor Level" will use the highest (H) price for long positions and the lowest (L) price for short positions.

This STOP needs at least two bars to run. One bar for the "floor level", the other for the "breakeven amount".
Tip: If the "Floor Level" is defined as 0, STOP will run only when the profit on transactionreaches a sufficint level to close the transaction without making a loss reflecting the transaction costs.

Inactivity
The No Activity line of defense closes a position if during a predefined timeframe the price of a unit fails to show a predefined positive change (a positive change is an increase in the value of the unit for long positions and decrease for short positions).

You can specify the "Minimum Change" in points or as a percentage. "Periods" are bars used on the graph.

Example: If the "Minimum Change" is defined as 1% and "Periods" as 20 bars, Metastock will automatically change the long (short) position if within 20 bars of the opening a 1% increase (decrease) is not recorded.

Considering that the analysis focuses on the change in the price of the unit rather than on the change in the amount of equity, STOP does not include the commission.

Maximum Loss
This STOP closes the open position if the loss on the transaction exceeds the level specified in the "Maximum Loss" field.

Example: If you set "Maximum Loss" at the level of 5%, the position will be closed once the loss exceeds 5% of the equity at the opening of the position (+ commissions).

Please note : Setting "Maximum Loss" at the level equal to or lower than the transaction costs will cause every position to be closed once it is opened because as soon as the position is opened the loss will exceed the maximum limit due to the commission.

Profit Target
This STOP will close the position once the profit reaches a predefined level.

Example: if the target profit level is set at 10%, Metastock will close the position once the transaction causes the equity to rise by an amount equivalent to 10% of the initial equity. This includes transaction costs.

Trailing
The line of defense of the risk incurred - closes the position if part of the profit on transaction is lost.

After every increase in profit on the position, the "Trailing Stop" will be changed - allowing only the loss of part of the generated profit. The allowed "Profit Risk" level is set in the relevant field and expressed as "Percent" or as "Points".

Metastock lets you define the number of periods during which this value will be ignored. Example: if you set the period at the level of 5, profit or losses incurred during the last 5 bars will be ignored while determining the current line of defense. This enables Metastock to ignore minor price changes occuring in the defined period.

This stop aims to protect the profits obtained on a transaction rather than minimize losses on that transaction. It defines how much of the profits we are willing to give up in that transaction. If the transaction yields no profit, the loss attributable to that transaction can be limited by applying the "Maximum Loss" STOP.

The level of this STOP is set onthe basis on the generated profit rather than the current price. Therefore it is not specifically associated with short positions.

Example: 10% is the allowed "Profit Risk" level. 0 is the time during which the signal is ignored. When the profit on a transaction reaches $1,000 Metastock willclose the position the moment that the change in the price of the unit causes the profit to fall to $900 (or below).