In this paper, we present general implications of the impact of
stop-losses to future returns. The use of stop-losses change return
distributions, but not in the way that one would typically expect. We
find that while stop-losses can reduce position volatility, hidden
costs offset perceived benefits in terms of altering future returns.
Use of both stop-losses and profit-taking stops separately or in
conjunction offer no statistically significant difference in expected
return but have a meaningful impact in returns with drift, as the
expected return converges to that of the underlying.