BHP fell right through my stop loss! What to do?

[princeplanet]

The other day when BHP dropped 80c it dropped right through both my trigger and my sell limit so none actually got sold. It's now 60c below what I wanted to sell at. It's annoying, because I thought the stop loss would help me sleep at night, but no! Because Cosec (or rather ASIC) wont allow you to set a wide enough margin between your trigger price and your price limit, in a mini crash, prices will fall right through both, leaving you exposed to further falls. Why are the margins allowed less than one percent? Any way to protect myself from this in future? Any way to guarantee a sell after it falls below a nominated price?

Back to my predicament, if I don't cancel the sell order, then when BHP rises back through my target range, it will sell, just when I probably wouldn't want to as I'd expect it to go higher still (if there's momentum). So I think I'll cancel the sell order. What do you guys usually do in this case?

 

[skyQuake]

The other day when BHP dropped 80c it dropped right through both my trigger and my sell limit so none actually got sold. It's now 60c below what I wanted to sell at. It's annoying, because I thought the stop loss would help me sleep at night, but no! Because Cosec (or rather ASIC) wont allow you to set a wide enough margin between your trigger price and your price limit, in a mini crash, prices will fall right through both, leaving you exposed to further falls. Why are the margins allowed less than one percent? Any way to protect myself from this in future? Any way to guarantee a sell after it falls below a nominated price?

Back to my predicament, if I don't cancel the sell order, then when BHP rises back through my target range, it will sell, just when I probably wouldn't want to as I'd expect it to go higher still (if there's momentum). So I think I'll cancel the sell order. What do you guys usually do in this case?

You mean Comsec? Also, ASIC doesnt do anything about setting stops, if theres any limitation its the broker.

There are such things as a Guaranteed stop loss, but they are generally very expensive.

Looks like you should have set a stop market instead of a stop limit.

In any case, The stop is to force upon you the small loss. All big losses start as small losses...

 

[princeplanet]

You mean Comsec? Also, ASIC doesnt do anything about setting stops, if theres any limitation its the broker.

There are such things as a Guaranteed stop loss, but they are generally very expensive.

Looks like you should have set a stop market instead of a stop limit.

In any case, The stop is to force upon you the small loss. All big losses start as small losses...

Yeah Comsec, but they once told a pal of mine that ASIC sets rules for margins b/n trigger and limit, some stocks wider than others for some reason. Would love to know more... Anyway just realised I don't know how to cancel the fired trigger from Comsec site. This can be done, right? I only ask here cos I won't have time to call Comsec tomorrow during the day.

As for setting a stop market instead of stop limit - how do you do that? I suppose the risk is a stock may fall way beneath the trigger in an instant, and then sell. Some stocks can fall 10% in a minute, then rise back up the next minute. That'd be a bummer....?

 

[tinhat]

Yeah Comsec, but they once told a pal of mine that ASIC sets rules for margins b/n trigger and limit, some stocks wider than others for some reason. Would love to know more... Anyway just realised I don't know how to cancel the fired trigger from Comsec site. This can be done, right? I only ask here cos I won't have time to call Comsec tomorrow during the day.

As for setting a stop market instead of stop limit - how do you do that? I suppose the risk is a stock may fall way beneath the trigger in an instant, and then sell. Some stocks can fall 10% in a minute, then rise back up the next minute. That'd be a bummer....?

You probably mean the ASX not ASIC.

 

[princeplanet]

You probably mean the ASX not ASIC.

oops, yeah, ASX !

 

[ducati916]

You have a number of options:

You can close the trade, and take the loss
[ii] You can hold the trade, and hope
[iii] You can trade your way out of it

If you are a 'novice' then closing the trade and taking the loss is probably the best way to go. That you are even asking the question rather identifies you in this category. That is not a criticism, we've all been there.

Closing your eyes and hoping is not the way to go.

Trading your way out can be the best solution but it depends on your leverage, your available trading capital and your timeframe.

If you were to attempt this way then there are a number of possible strategies:

Trade it based on the technicals. On the 1 year chart, it is approaching support. My prices are US based. I have current price at $68.43 Support is at $65.oo'ish. You add to your position. Then calculate a stop-loss, a break-even point, and where you start generating profit. You close the entire position at a hard stop. You close the new position at B/E and close the remainder at your original profit target. Obviously your risk has changed quite significantly if you choose this option.

[ii] Convert the position into a pairs trade, thus converting the position in theory to a market neutral trade. The profit is earned on closing the spread. RIO would be the 'usual' pair, but, the trade is already upside down. A good possibility is the US ETF XLB. There is currently a 15% spread available. So in this trade you add to the BHP position and sell short XHB to finance the trade.

[iii] Add an Option position to the trade. Essentially hedge the position with a PUT position. I would favour a 'Backspread' position. The difficulty is in obtaining a credit. However, you can make it work with a low debit on the position as of course you hold the stock long. I would recommend about 6mths on the trade.

jog on
duc

 

[drsmith]

My advice here would be to man the station and not leave it to autopilot.

 

[CanOz]

You have a number of options:

You can close the trade, and take the loss
[ii] You can hold the trade, and hope
[iii] You can trade your way out of it

If you are a 'novice' then closing the trade and taking the loss is probably the best way to go. That you are even asking the question rather identifies you in this category. That is not a criticism, we've all been there.

Closing your eyes and hoping is not the way to go.

Trading your way out can be the best solution but it depends on your leverage, your available trading capital and your timeframe.

If you were to attempt this way then there are a number of possible strategies:

Trade it based on the technicals. On the 1 year chart, it is approaching support. My prices are US based. I have current price at $68.43 Support is at $65.oo'ish. You add to your position. Then calculate a stop-loss, a break-even point, and where you start generating profit. You close the entire position at a hard stop. You close the new position at B/E and close the remainder at your original profit target. Obviously your risk has changed quite significantly if you choose this option.

[ii] Convert the position into a pairs trade, thus converting the position in theory to a market neutral trade. The profit is earned on closing the spread. RIO would be the 'usual' pair, but, the trade is already upside down. A good possibility is the US ETF XLB. There is currently a 15% spread available. So in this trade you add to the BHP position and sell short XHB to finance the trade.

[iii] Add an Option position to the trade. Essentially hedge the position with a PUT position. I would favour a 'Backspread' position. The difficulty is in obtaining a credit. However, you can make it work with a low debit on the position as of course you hold the stock long. I would recommend about 6mths on the trade.

jog on
duc

Duc, welcome back!

 

[Garpal Gumnut]

The other day when BHP dropped 80c it dropped right through both my trigger and my sell limit so none actually got sold. It's now 60c below what I wanted to sell at. It's annoying, because I thought the stop loss would help me sleep at night, but no! Because Cosec (or rather ASIC) wont allow you to set a wide enough margin between your trigger price and your price limit, in a mini crash, prices will fall right through both, leaving you exposed to further falls. Why are the margins allowed less than one percent? Any way to protect myself from this in future? Any way to guarantee a sell after it falls below a nominated price?

Back to my predicament, if I don't cancel the sell order, then when BHP rises back through my target range, it will sell, just when I probably wouldn't want to as I'd expect it to go higher still (if there's momentum). So I think I'll cancel the sell order. What do you guys usually do in this case?

Sorry I cannot answer the first paragraph as I don't trade that close to the market on a daily basis.

As to your second paragraph, you need to decide on what you are doing, or hoping to achieve. It sounds as if you had a plan, that was poorly executed, setting a stop limit, no harm in that and you will learn from it.

My main advice to you is to have a realistic plan. If it goes back up through your sell price, and it sells you should be happy that despite your poor execution, you have escaped. Escaping can be at a loss, whether the the share goes further south or north. You are out. Plenty more stocks to trade.

If that does not suit, ask yourself would you have bought it at the closing price on Thursday and if so are you willing to factor in a further fall or a rise and trade it, in which case cancelling the sell order might be the way to go.

I generally find milo the best for sleep, and not worrying about my shares overnight also helps.

gg