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How to Backtest Stop-Loss Placement Fairly

Research protocol · Reviewed 24 Aug 2026

A stop method changes distance, position size, trade duration, and sometimes the target. To learn what placement contributes, use the same entry observations and equalize account-currency risk.

Record maximum adverse and favourable excursion before judging whether a wider stop improved the trade or merely delayed its exit.

Same entries, three stops

FIELD 40

Compare stop methods without changing the signal

Replay one frozen entry list with a fixed-pip stop, a volatility-based stop, and a predeclared candle-structure stop. Adjust position size so account risk stays equal. This isolates stop placement instead of rewarding the widest stop with more room and more risk.

  1. Define the structure candle before entry.
  2. Use the same target logic in all variants.
  3. Report maximum adverse excursion.
  4. Stress costs and gap handling.

A stop can be hit less often simply because it risks more distance; equalize the account risk.

Define three stop variants in advance

Specify the fixed-pip distance, ATR lookback and multiple, and exact candle-structure reference. Decide how gaps, spread, and same-bar stop/target events are handled before calculating results.

Inspect the path around the stop

Report stop-out rate, expectancy, drawdown, maximum adverse and favourable excursion, and target completion for every variant. A later period should test whether an apparent improvement was more than one volatility regime.

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