As a sound statistical measurement of price variance (volatility), the standard deviation can be used to determine stop-loss levels. SD Stops computes a standard deviation stop loss by measuring all the 2-day true ranges (TR) for the past 20 trading days and computes the standard deviation (STDV) of the true ranges. A month of data (20 days) is considered suitable because that amount of time makes it sensitive enough to changing price behavior while at the same time giving output that is statistically valid for computing standard deviations of share excursion (volatility). SD Stops cam calculate stop-loss levels for long and short positions. The standard deviation, or multiple thereof, can then be added to or subtracted from the High, Low, or Close (depending on the user's preference. By applying the result of these computations as a trailing stop, the unnecessary loss of equity because of improperly placed stop losses can be reduced considerably.
Statisticians consider the standard deviation to be the best and most statistically valid measurement of variance (in this case, stock volatility) available. By taking a sample of 20 days, a standard deviation can be computed that gives a relatively accurate estimate of price excursion beyond the limits of the data sampled. An easier to visualize illustration is its application to the measured heights of men. A standard deviation can be used to estimate the full range of heights of 10,000 men in an arena by taking a random sample of 100 of those men (assuming the 10,000 men in the arena are randomly distributed by height and that the 100 men are selected randomly). The standard deviation can even give a relatively accurate estimate of how many men in the arena are 6'8" even if there are no men of that height among the 100 men measured. Fairly accurate estimates can be made because the frequency of occurrence of various heights in a population follow what is known as a Gaussian distribution or normal bell-shaped curve. The same is true of IQs the weights of people, muscular strength, and so on. Many traders also consider it to be the best way we have of estimating the probable range of the price surges of a stock. Price surges represent volatility (risk).
This tool is probably one of the simplest tools available anywhere for calculating stop losses based on the standard deviation. It is so simple to use that a User's Guide is not necessary. All explanations needed are included on the "SD Stops" page, though we will probably include some procedural suggestions in a cover note we send to those who place an order. Basically, a person enters a 1, 2, or 3 in cell C-6 to base stop losses on the highest high, low, or close, respectively. A number from 1 to 3 is usually entered in cell G-6 to define the standard deviation multiplier or "weighting" that will be used in the computations. Decimals are also acceptable (2.53, 3.45, etc.) (see the "SD Stops" page for details). If an "S" is entered in cell E-6, the program will assume it is calculating for a short position. The program assumes that a stock has a rising pattern when it calculates a stop loss for a long position. It assumes the stock has been in a declining pattern if an "S" is entered in cell E-6. These are generalizations that may not apply to your situation. So, be sure to use the program in a way that is consistent with its internal assumptions. Otherwise, you may see sell signals all over the place that do not make sense for your particular position.
Why data input is not automated.
You must have Excel 2007 (or later) installed on your computer, and be able to open an Excel spreadsheet with macros in order to use SD Stops. If you have Excel 2007 or later installed on your computer, click on the following link. It will take you to a page where you can download a small exe (executable) file with a macro (SD Stops has a few macros). The macros in SD Stops are essential to the proper functioning of the tool, so they must be enabled (a simple setting choice in Excel). If you can enter a number and cause the macro to work and the spreadsheet to recalculate, then you should have no trouble using Stops on your system (unless you have a Linux or Apple system, and those may or may not work depending on configuration). Do not try to open the file with Excel. That will not work. Simply click on the downloaded icon and it will open. Notice: There are problems when a person attempts the test or tries to use SD Stops when he or she has an older versions of Excel. Do NOT attempt to open SD Stops or even try to test your system if you have Excel 2003 or another older version of Excel (even if you also have a later version installed as well). Contact us for details if you have an older version before you attempt the test. There are no known problems when the user has only Excel 2007 or a later version installed. Try the test
Ordering and The License Agreement
Read the License Agreement for details before ordering. To read the License Agreement, click on Agreement. An order cannot be transmitted to us unless you acknowledge that you have read the License Agreement.
IMPORTANT:
1. The trial period is for first-time users only. It begins when we send you the Operational Codes needed to make the calculator work correctly, NOT when you begin to use the tool. We will send you the codes after we receive your order. Please read the License Agreement before ordering. Also read our Terms of Use. The order form will ask you if you have read both of these and if you agree to their terms.
2. There may be times when our stop loss calculators are not available. Programs may be unavailable if modifications, updates, or improvements are being implemented. If the programs are available, your order will go through. If not, you will get a message stating that the product you ordered is not available, and your credit card will not be charged.
For more information on standard deviation and its meaning and use in stop loss calculations go to
http://www.stockdisciplines.com/stop-loss-probabilities
The license period (6-months) automatically renews when the license period expires. If you wish to cancel you must do so before the license renews. See the "Refunds & Policies" page for details.
Below, you have two selection possibilities, according to whether you have a 32-bit or 64-bit version of Excel. Be sure to order the correct version of SD Stops. Even if you have a 64-bit operating system, you may have a 32-bit version of Excel. The appropriate version of SD Stops depends on what version of Excel you have installed on your computer. For example, a 32-bit version of Excel will not work with a 64-bit version of SD Stops. Excel 2007 is 32-bit. Later versions could be either. If you are not sure, click on Excel Version .