[[Start here]] → [[What works in stocks?|what works]] → [[maintain your discipline|discipline]] → [[when to sell]] → volatility stops --- The mistake that most investors make with stop losses is to use the same stop loss level for all positions. They pick something arbitrary like 10% and wonder why they get whipsawed out of their positions regularly. There’s nothing worse than selling your position on a 10% loss only to see the stock bounce back the next day. Welles Wilder introduced the concept of “Volatility Stops” in his 1978 book “New Concepts in Technical Trading Systems”. **The key is to set your stop loss level in relation to a share’s price volatility.** More volatile shares are more likely to hit tight stop loss levels. So use wider stop levels for more volatile shares. > Usuallly I will give more room to more volatile stocks, such as high-tech issues, and less room to more conservative stocks, such as utilities. > **Marty Zweig**[^1] There are many approaches to this, but for investors, a good shortcut is to use Stockopedia’s [RiskRating Classifications](https://www.stockopedia.com/books/riskratings/) or the “[6 month Volatility](https://www.stockopedia.com/ratios/6-month-volatility-12002/)” metric. I find that using the 6 month share price volatility (or less) to be a reasonably effective stop loss level for most shares. In terms of coupling stop loss levels to the RiskRatings, I’ve found the following rules of thumb quite useful. We applied these in our Investment Club to good effect. ![[stoploss-riskratings.png.png]] The RiskRatings are published at the top of all [Stockopedia](https://stockopedia.com/) StockReports in the Classifications section. [^1]: [[Zweig - Winning on Wall Street]] - p237