Stop losses - non negotiable?

[RocketGirl]

stargazer - I'm still a bit confused re conditional orders too.

You set the trigger price $0.95, and a limit price $0.90. They say they will sell it for no less than that limit price. Does that mean it may sell for more than $0.90? If so, how?? if the trigger creates an order at $0.90 that would be it wouldn't it? Yet they imply that they will try to sell it once the condition is triggered but at no less than the limit.

 

[cuttlefish]

RocketGirl yes it can and probably will sell for more than .90 if the bid queue is still sitting above .90 when the order gets triggered (which it typically will be if the stop loss was set at .95).


e.g.
Stock XYZ
Last Traded .95

Bids ====== Offers
1000 .94 | .95 2000
2000 .93 | .96 5000
5000 .92 | .98 6000


If you had a .95c stoploss to sell 2000 shares at limit price .90 and the above was the state of the queue's when your ordered was triggered then you would get 1000 sold at .94 and 1000 sold at .93 so an average price of .935.

 

[RocketGirl]

But that would be like an 'at market' order wouldn't it? And we're being told here that it's not 'at market', it's put in the queue.

 

[cuttlefish]

I'm not too sure how to explain this much further except to say that a conditional order, once the trigger condition is met, becomes a normal limit order just like any other limit order you would place in the market manually, with no special bells or whistles attached.

The ordering in the sell queue is based on time and price priority. Thus if the lowest order currently in the offer queue is .95 cents and you have a limit order that is .90c then your order goes to the front of the queue because it is of a lower price than the current order at the front of the sell queue and thus gets priority. Now because your limit is .90c and there are already bidders there (in my example above) that exceed this price it means your order also gets filled immediately by the first 2000 bidders in the queue that match or exceed your sell price.

On the other hand if it was a different scenario and there was already an order for .90c in the sell queue when your condition got triggered, then your order would get placed behind it in the queue because the other order has time priority (i.e. it was placed before yours).

 

[AlterEgo]

But that would be like an 'at market' order wouldn't it? And we're being told here that it's not 'at market', it's put in the queue.

Yes, it kind of acts like an 'at market' order, but it's not actually an 'at market' order. An 'at market' order will sell down to whatever price it needs to get the order filled - depending on what orders are in the queue at the time, that may put the price down much below the 90c. In the example you gave it will get filled at whatever the highest orders are in the bid queue (down to 90c) until it gets filled, or if there are no orders in the queue between 90c -95c, your order will just sit in the ask queue at 90c. Cuttlefish's example above is correct.

 

[AlterEgo]

Yep, it just submits a normal 'limit' order at 90c. If the market depth looked like the example Cuttlefish gave above, and you placed a normal 'limit' order at 90c, it would get filled at an average price of 93.5c

 

[RocketGirl]

*ping!* I think I get it! LOL! Thank you. Takes a while for some things to process hehe. That made complete sense cuttlefish

 

[cuttlefish]

*ping!* I think I get it! LOL! Thank you. Takes a while for some things to process hehe. That made complete sense cuttlefish

woohoo success! glad to hear it.

 

[white_goodman]

if i was to set a trigger and a limit both at 95c , does that mean it could only be sold for 95c? is that possible?

 

[white_goodman]

also do you advise stop loss based upon a percentage of total capital/portfolio or percentage of that particular stock?


im thinking the first...?

 

[AlterEgo]

if i was to set a trigger and a limit both at 95c , does that mean it could only be sold for 95c? is that possible?

In that example it would only be sold at 95c IF there was enough volume in market depth at 95c, if not then you may only get a portion of your holding sold or none at all, unless the market comes back up to your price.

 

[AlterEgo]

also do you advise stop loss based upon a percentage of total capital/portfolio or percentage of that particular stock?


im thinking the first...?

Neither. I'd set my POSITION SIZE (not stop-loss) based on a percentage of total capital at risk at a given stop-loss point. Stop-loss would be determined by your trading strategy.

 

[AlterEgo]

Maybe I should elaborate a bit more on that point...

Say for example you were intending to enter a trade at 1.00. Based on whatever system you are using you would first determine a suitable place for the stop-loss – maybe below a trendline, place of support, moving average, ATR, etc, - whatever sort of system works for you and your trading timeframe. Say for example that you determined from this that the ideal place to set the stop-loss was .90, you have 50K capital and you are setting position size to 1% total capital risk...

1% of $50,000 = $500 max. that you want to risk
You are risking 10c per share, so you can therefore buy 5,000 shares and risk only 1% of total capital.

 

[white_goodman]

In that example it would only be sold at 95c IF there was enough volume in market depth at 95c, if not then you may only get a portion of your holding sold or none at all, unless the market comes back up to your price.

say i do set the trigger and limit at 95c and ive got 100 shares.... say there was a buy order at 95c for 99 shares...hence 99 shares of mine were sold and i incur brokerage....

does that mean to sell that extra 1 share i incur brokerage again when it comes back up to 95c?

 

[stargazer]

Hi all

Very good explanations and getting very close to the PING my last question...

Taken from E trade:
Set the conditional order BASIC
Trigger Price:
the price the stock must reach to trigger the conditional order

Greater than or equal to
Less than or equal to

Limit (Optional):

Volume (Optional):

Does the limit need to be used to ensure it doesn't get sold at a price you don't agree with?

Cheers
SG

 

[AlterEgo]

say i do set the trigger and limit at 95c and ive got 100 shares.... say there was a buy order at 95c for 99 shares...hence 99 shares of mine were sold and i incur brokerage....

does that mean to sell that extra 1 share i incur brokerage again when it comes back up to 95c?

No, but if the last share didn't sell that same day, and sold the next day, then depending on your broker's fee structure you may get hit with another brokerage fee the next day when the final share gets sold. Your broker's PDS should set out their fee structure.

 

[AlterEgo]

Hi all

Very good explanations and getting very close to the PING my last question...

Taken from E trade:
Set the conditional order BASIC
Trigger Price:
the price the stock must reach to trigger the conditional order

Greater than or equal to
Less than or equal to

Limit (Optional):

Volume (Optional):

Does the limit need to be used to ensure it doesn't get sold at a price you don't agree with?

Cheers
SG

I'm not familiar with ETrade. I'm used to using these type of orders in webIRESS. But yes, I'd say that'd be correct. It won't sell for less than that price,.... but may not get sold at all.

 

[white_goodman]

No, but if the last share didn't sell that same day, and sold the next day, then depending on your broker's fee structure you may get hit with another brokerage fee the next day when the final share gets sold. Your broker's PDS should set out their fee structure.

its commsec so i dunno, maby other people do... i dont think it really will affect me in the short term anyways im generally dealing with the smaller volumes

 

[RocketGirl]

Commsec doesn't charge extra brokerage for a split order like that. I've had it filled over 2 days before and the 2nd contract note doesn't have any brokerage on it.

 

[stargazer]

Hi all

Thanks for the replies and explanations i reckon thats a PING :jump::band

Cheers
SG