Stop Loss and Stop Gain Rules

ta4j now provides a full stop-rule toolkit that covers fixed %, fixed amount, trailing variants, and volatility/ATR-adaptive variants for both loss and gain exits.

Use this page as the operational guide for:

• Choosing the right stop type for your strategy style.
• Wiring stop rules into strategy exits.
• Applying stop logic safely in live trading.

Rule families

Fixed percentage (classic)

• StopLossRule
• StopGainRule
• TrailingStopLossRule
• TrailingStopGainRule

These use percentage distance from entry (or favorable move for trailing variants).

Best when:

• You want simple, interpretable risk limits.
• Price scale does not change dramatically over time.

Fixed amount (flat-dollar / flat-price-distance)

• FixedAmountStopLossRule
• FixedAmountStopGainRule
• TrailingFixedAmountStopLossRule
• TrailingFixedAmountStopGainRule

These use an absolute price distance (for example: $10 from reference).

Best when:

• Instruments trade in a stable price range.
• You size positions independently and want fixed distance exits.

Volatility-driven

• VolatilityStopLossRule
• VolatilityStopGainRule
• VolatilityTrailingStopLossRule
• VolatilityTrailingStopGainRule
• AverageTrueRangeStopLossRule
• AverageTrueRangeStopGainRule
• AverageTrueRangeTrailingStopLossRule
• AverageTrueRangeTrailingStopGainRule

These use a dynamic threshold based on volatility indicators (typically ATR multiplied by a coefficient).

Best when:

• Volatility regimes shift frequently.
• You want stops that widen in high vol and tighten in low vol.

Quick selection guide

• Trend-following swing systems:
  • Start with AverageTrueRangeTrailingStopLossRule for downside protection.
  • Pair with TrailingStopGainRule or AverageTrueRangeTrailingStopGainRule for profit capture.
• Mean-reversion systems:
  • Use tighter StopLossRule / FixedAmountStopLossRule.
  • Use non-trailing StopGainRule / FixedAmountStopGainRule at expected reversion targets.
• Intraday scalping:
  • Prefer fixed amount stops when spread/tick structure dominates.
  • Add a volatility stop fallback for regime changes.

How to wire exits

ClosePriceIndicator close = new ClosePriceIndicator(series);
ATRIndicator atr = new ATRIndicator(series, 14);

Rule riskExit = new AverageTrueRangeTrailingStopLossRule(close, atr, 2.0)
        .or(new AverageTrueRangeTrailingStopGainRule(close, atr, 3.0))
        .or(new StopLossRule(close, series.numFactory().numOf(1.5))); // hard fail-safe

Rule signalExit = new CrossedDownIndicatorRule(fast, slow);
Rule exitRule = signalExit.or(riskExit);

Strategy strategy = new BaseStrategy(entryRule, exitRule);

Notes:

• Keep one hard fail-safe stop even when using adaptive stops.
• Avoid stacking many correlated stop rules unless each has a distinct purpose.

Using stop-price models for risk analytics

Several rules implement:

• StopLossPriceModel
• StopGainPriceModel

This lets you query stop prices directly (for example in risk budgeting or custom position sizing flows) without duplicating threshold math.

Live trading usage patterns

1) Match your reference price to execution reality

• If broker triggers on last trade, using ClosePriceIndicator may be acceptable.
• If broker triggers on bid/ask or mark/index price, use a matching indicator source.
• Do not mix trigger source and backtest source silently.

2) Decide bar-close vs intrabar evaluation

• Bar-close only:
  • Fewer false triggers, easier reproducibility.
  • Slower reaction.
• Intrabar (tick/stream updates):
  • Faster protection.
  • More noise and higher order churn.

Pick one model explicitly and keep it consistent between research and production.

3) Protect against gaps and slippage

• Stops are trigger conditions, not guaranteed fills.
• Plan with slippage cushions:
  • tighter position sizing,
  • broker-native stop/stop-limit where possible,
  • exchange outage safeguards.

4) Avoid stop churn

• Trailing rules can move often in noisy markets.
• Add guardrails:
  • minimum update interval,
  • minimum stop delta before replace,
  • cancel/replace rate limits.

5) Keep a stop hierarchy

• Primary logic stop (strategy-level)
• Catastrophic fail-safe stop
• Portfolio kill-switch (max drawdown / exposure limit)

Do not rely on a single mechanism.

Parameter tuning tips

• ATR period:
  • shorter (7-14) reacts quickly,
  • longer (20-50) is smoother and slower.
• ATR coefficient:
  • lower values stop out earlier,
  • higher values reduce churn but increase average loss size.
• Trailing lookback (barCount where applicable):
  • short lookback tightens quickly,
  • long lookback gives trends more room.

Practical tuning workflow:

1. Optimize for robustness first, not max return.
2. Validate on multiple volatility regimes.
3. Compare with realistic fees/slippage.
4. Stress test gap days and high-spread windows.

Common mistakes

• Using fixed % stops on instruments with changing volatility regimes and no adaptive fallback.
• Using adaptive stops without a maximum loss cap.
• Overfitting stop parameters to one market period.
• Backtesting on close-only, then trading on tick-level without recalibration.
• Ignoring order semantics (partial fills, reduce-only, stop-limit miss risk).

Live deployment checklist

• Confirm stop trigger source (last, bid/ask, mark/index) matches indicator input.
• Confirm order type behavior on your venue.
• Confirm replacement throttling and retry logic.
• Confirm persistence and restart behavior for open positions and trailing state.
• Confirm metrics/alerts for stop-trigger frequency, slippage, and rejected orders.

See also:

• Trading Strategies
• Live Trading
• Backtesting