  Stop-loss rules are often studied in the financial literature, but the
stop-loss levels are seldom constructed systematically. In many papers, and
indeed in practice as well, the level of the stops is too often set
arbitrarily. Guided by the overarching goal in finance to maximize expected
returns given available information, we propose a natural method by which to
systematically select the stop-loss threshold by analyzing the distribution of
maximum drawdowns. We present results for an hourly trading strategy with two
variations on the construction.
