Historical test result
Half of 151 dip buys hit the stop.
About half of my dip buys hit the stop, which is an order that closes your trade at a set loss. On your 100,000 dollar account that worst day would have cost you about 5,800 dollars, which breaks your loss limit and ends your challenge.
Why a tight stop feels safe
Many traders tell me the same thing before they pay the fee. You buy a small drop and you place a tight stop so your loss stays small. You think a small stop means small risk. Buying dips with a tight stop keeps the risk low.
That idea feels right because you see the line on your chart. You know where you get out. You feel in control. And you tell yourself the market will respect your line.
I thought the same way for a long time. A dip looked like a sale. A tight stop looked like a seat belt. You pay little if you are wrong and you gain a lot if you are right. That story is simple and it sells well. But a story needs a test.
You want proof before you pay. You want to see how the plan acts when the price falls fast. A good test shows you the stops and the bad days in plain numbers.
What my test showed
I ran a test on dip buying in a hard market. The market was the S&P 500, which tracks the price of big United States stocks. The time was 2018 to 2023. In the Fed-put test, 73 of 151 trades ended at the stop or a gap through it. Dip buying meant stop hunting.
A gap is when the price jumps past your stop and your trade closes at a worse price. You plan a small loss and you take a bigger one. That happened a lot in my test. The worst day was -5.8% on the full size. You can see why a tight line failed.
You think one bad day means little. A challenge leaves you little room for such a day. You need to see the full path with the wins and the losses.
What that means for your fee
You pay the fee before you know how the plan acts in a bad week. A challenge is a paid test where you must hold your loss limits to stay in. A loss limit is the most you may lose before you fail. One bad day can use up that room.
In my test the stops came in bunches. You would take many small losses back to back. Your account would drop day after day. You would feel the need to win it back fast. That rush leads to bigger mistakes.
Think about your own plan. You want a plan that survives a bad week. You want to know how it acts when the price runs against you. A tight stop gives you little room. It closes you out and it asks you to try again. Each new try costs you more in fees and in nerves.
How you check your own report
You can do this check in five minutes on your own report. A report is the list of your past trades with wins and losses. Open your last report and count how many trades closed at the stop and compare that count with your total trades.
If that count is high, your plan lives on stops. You see many small losses before a win. Ask yourself if you can pay for that path through a bad week. You need room for a bad run. A plan that needs many tries needs deep pockets and calm nerves.
What I do now
I tested because I wanted to know before I paid. I never pay a challenge fee for a dip plan until I know how many trades end at the stop. You deserve the same look before you risk your fee. Take your report and run the check above. If stops run your plan, look for a calmer path.
You need a plan you can hold through stress. You need to sleep while it works.
The limit of this test
These are historical test results, not a live account.
Check your own rules with my free Prop Rule Guard at https://stratcorealpha.com/rule-guard?ref=website.