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Quantitative Finance · Glossary

What is Stop discipline?

Definition 17.3 Strategies II: Volatility, Relative Value, Macro and the Bank Desks · Chapter 17 — Discretionary Macro

Stop discipline is the rule, set when a position is opened, for cutting it after a given loss or adverse move, and the practice of following the rule; it limits the loss on wrong views at the price of cutting some right ones before they pay.

The share of correct views (the rate ends lower after six months) whose futures position was stopped out first, by the stop’s distance, on the synthetic paths. Data: s2_macrobook.stops.
Figure 17.2. The share of correct views (the rate ends lower after six months) whose futures position was stopped out first, by the stop’s distance, on the synthetic paths. Data: s2_macrobook.stops.
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