Occasionally a portfolio model breaks down completely. Murphy’s Law takes hold, and everything that can go wrong does. At that point, the remedy is to close down the system and exit all positions. A standard for closing the entire portfolio model is a dollar or percentage stop, usually around 20%. No system should sustain that amount of loss without adjustment.
Source: Kirkpatrick II Charles D., Dahlquist Julie R. (2015), Technical Analysis: The Complete Resource for Financial Market Technicians, FT Press; 3rd edition.
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