Stop Loss is not always your friend...

[princeplanet]

This happened to me twice in one week last month, both times the day before the stocks (CCV and RIO) went ex div, essentially the SP spikes 8% down and then up again, enough to trigger my stop order orders. Obviously I don't buy back in as I'd be down 8%. Missing the dividend was bad enough, and in the case of CCV watching it climb a fair bit in the last fortnight is just salt in the wound!

Being a newb, what did I do wrong here? I thought I was being "safe", but still managed to get royally rogered. How do I avoid this happening again? Please don't say avoid stop losses altogether, they have worked for me as well as against (infact RIO has gone way down since then, so don't feel so bad about it now...).

Any strategies for minimising these kinds of risks?

 

[CanOz]

Re: Stop Loss is not always your friend....

This happened to me twice in one week last month, both times the day before the stocks (CCV and RIO) went ex div, essentially the SP spikes 8% down and then up again, enough to trigger my stop order orders. Obviously I don't buy back in as I'd be down 8%. Missing the dividend was bad enough, and in the case of CCV watching it climb a fair bit in the last fortnight is just salt in the wound!

Being a newb, what did I do wrong here? I thought I was being "safe", but still managed to get royally rogered. How do I avoid this happening again? Please don't say avoid stop losses altogether, they have worked for me as well as against (infact RIO has gone way down since then, so don't feel so bad about it now...).

Any strategies for minimising these kinds of risks?

If you want the divi then why not allow for a little extra volitility in your stop placement.

Otherwise stay out of the market until the stock goes Ex.

CanOz

 

[pixel]

Re: Stop Loss is not always your friend....

This happened to me twice in one week last month, both times the day before the stocks (CCV and RIO) went ex div, essentially the SP spikes 8% down and then up again, enough to trigger my stop order orders. Obviously I don't buy back in as I'd be down 8%. Missing the dividend was bad enough, and in the case of CCV watching it climb a fair bit in the last fortnight is just salt in the wound!

Being a newb, what did I do wrong here? I thought I was being "safe", but still managed to get royally rogered. How do I avoid this happening again? Please don't say avoid stop losses altogether, they have worked for me as well as against (infact RIO has gone way down since then, so don't feel so bad about it now...).

Any strategies for minimising these kinds of risks?

RIO went ex-div on the 6th, CCV on the 8th.
Both dividends came out at less than 2%, well below the relative volatility. IMHO, that makes dividend stripping not the most effective way to trade those two stocks. In CCV's case, you would have held against an 8c drop, hoping for a 2c gain the next day. OK, so you could say you were happy to hold because CCV was in an uptrend and recovered quickly. But if that was your conviction of the stock, you could just as easily have widened the stop-loss margin.
Would I recommend fiddling with the rules? Hell, no! Especially if you're a noob, you trade your Plan and accept that some individual trades turn out less than optimal, but on overall balance, your system has a positive return. In the chart below, the arrows indicate buy and sell levels. Quite obviously, the 7th was the day to sell, as close to $1.30 as possible. Had you then bought the next arrow on the 15th, again close to $1.30, you'd be in good profit by now, several times the measly 2c dividend.

 

[tech/a]

Re: Stop Loss is not always your friend....

Obviously I don't buy back in as I'd be down 8%.

If your stop took you out at the very bottom yes.
But your down 8% then whether your on the side crying or back in it after
you've noticed the why.
Its happened to me before ---- being a techie I've been stupid enough
not to check simple things.
But I would be straight back in if it was still technically a hold--spike or not.

 

[princeplanet]

Re: Stop Loss is not always your friend....

If you want the divi then why not allow for a little extra volitility in your stop placement.

Otherwise stay out of the market until the stock goes Ex.

CanOz

Yeah, from now on, a few days before going ex I cancel the stop, seeing it's gonna be purged by Comsec on the ex div day anyway. This way I can't get bitten by any nasty spikes down. BTW, the spike down for CCV was the director selling a bunch of shares. Effectively it 'bounced' me out of the divvy, me and a stack of others I imagine. Is this a kind of illegal manipulation?

 

[princeplanet]

Re: Stop Loss is not always your friend....

RIO went ex-div on the 6th, CCV on the 8th.
Both dividends came out at less than 2%, well below the relative volatility. IMHO, that makes dividend stripping not the most effective way to trade those two stocks. In CCV's case, you would have held against an 8c drop, hoping for a 2c gain the next day. OK, so you could say you were happy to hold because CCV was in an uptrend and recovered quickly. But if that was your conviction of the stock, you could just as easily have widened the stop-loss margin.
Would I recommend fiddling with the rules? Hell, no! Especially if you're a noob, you trade your Plan and accept that some individual trades turn out less than optimal, but on overall balance, your system has a positive return. In the chart below, the arrows indicate buy and sell levels. Quite obviously, the 7th was the day to sell, as close to $1.30 as possible. Had you then bought the next arrow on the 15th, again close to $1.30, you'd be in good profit by now, several times the measly 2c dividend.

View attachment 51604

Yeah, I did sense CCV was on an uptrend, but had zero confidence in my inkling.... After I was bounced out, I just felt dirty, like I'd been financially raped! I needed time to think about what had happened and by 4 oclock, it was too late to save the div. You're right though, screw the div in that instance, I should have kept my eye on the bigger prize. Maybe getting stung is the best way to learn a lesson......

 

[CanOz]

Re: Stop Loss is not always your friend....

Is this a kind of illegal manipulation?

I don't know, if its an obvious place for stops some big knob might gun for them for a quick scalp...yeah why not? Its not manipulation, just part of the game really....

CanOz

 

[ROE]

Re: Stop Loss is not always your friend....

Yeah, from now on, a few days before going ex I cancel the stop, seeing it's gonna be purged by Comsec on the ex div day anyway. This way I can't get bitten by any nasty spikes down. BTW, the spike down for CCV was the director selling a bunch of shares. Effectively it 'bounced' me out of the divvy, me and a stack of others I imagine. Is this a kind of illegal manipulation?

called market and system risk, expect manipulation, pump and dump, short sell in for the kill, some one or something doesn't like your stocks and XXX factors ...

when you in the market EXPECT and ACCEPT these things happen, whether it happen or not and price accordingly
you be a much better investor if you accept and expect those thing to happen

 

[ROE]

Re: Stop Loss is not always your friend....

This happened to me twice in one week last month, both times the day before the stocks (CCV and RIO) went ex div, essentially the SP spikes 8% down and then up again, enough to trigger my stop order orders. Obviously I don't buy back in as I'd be down 8%. Missing the dividend was bad enough, and in the case of CCV watching it climb a fair bit in the last fortnight is just salt in the wound!

Being a newb, what did I do wrong here? I thought I was being "safe", but still managed to get royally rogered. How do I avoid this happening again? Please don't say avoid stop losses altogether, they have worked for me as well as against (infact RIO has gone way down since then, so don't feel so bad about it now...).

Any strategies for minimising these kinds of risks?

Everything works until it stop working only you can answer what you prepare to do
no system is perfect, you lose some you win some make sure your win ratio is higher than your loss ratio.

 

[chops_a_must]

Re: Stop Loss is not always your friend....

I don't know, if its an obvious place for stops some big knob might gun for them for a quick scalp...yeah why not?

Haha.

Not to mention buying in the stack.

 

[Garpal Gumnut]

Re: Stop Loss is not always your friend....

Haha.

Not to mention buying in the stack.

lol

I generally try and execute my stop losses at 12.26 Sydney time.

Usually the North Shore snorters have a nose full of powder on board by late morning and are getting hungry for lunch, feel powerful and buy anything, and my stop loss is executed manually at my stop loss price.

Automatic stop losses are executed when they are operating at Year 10 level, at 10.10.

I prefer Grade 4.

Watch for daylight saving etc.

gg

 

[princeplanet]

Re: Stop Loss is not always your friend....

lol

I generally try and execute my stop losses at 12.26 Sydney time.

Usually the North Shore snorters have a nose full of powder on board by late morning and are getting hungry for lunch, feel powerful and buy anything, and my stop loss is executed manually at my stop loss price.

Automatic stop losses are executed when they are operating at Year 10 level, at 10.10.

I prefer Grade 4.

Watch for daylight saving etc.

gg

You taking the piss? In the Beginner's Lounge?? Nice....

 

[skc]

Re: Stop Loss is not always your friend....

This happened to me twice in one week last month, both times the day before the stocks (CCV and RIO) went ex div, essentially the SP spikes 8% down and then up again, enough to trigger my stop order orders. Obviously I don't buy back in as I'd be down 8%. Missing the dividend was bad enough, and in the case of CCV watching it climb a fair bit in the last fortnight is just salt in the wound!

Being a newb, what did I do wrong here? I thought I was being "safe", but still managed to get royally rogered. How do I avoid this happening again? Please don't say avoid stop losses altogether, they have worked for me as well as against (infact RIO has gone way down since then, so don't feel so bad about it now...).

Any strategies for minimising these kinds of risks?

The point of the stop loss is exactly that - stops you from further loss. With placing stops you need to consider many things. Your risk, your intended holding period, the volatility of the stock as well as the liquidity of the stock.

I don't know what exactly happened with CCV but it appears that the seller hit a soft spot in liquidity so the price crashed through before quickly recovering. So... with a low liquidity stock (like one with a thin market depth), you need a wider stop.

And sometimes you just accept there's bad luck and you move on. When you trade enough you will eventually learn to have no emotion what so ever when a stop is triggered.

And don't blame every bad trade on manipulation. The director needed to sell and executed poorly. He sold his shares cheaper than he otherwise could so he's lost more than anyone else. Those idiots on HC have been saying Lynas is manipulated from $2 down to 50c...

 

[Boggo]

Re: Stop Loss is not always your friend....

The point of the stop loss is exactly that - stops you from further loss. With placing stops you need to consider many things. Your risk, your intended holding period, the volatility of the stock as well as the liquidity of the stock.

Exactly, I wonder how many are still holding BBG who now wish they had a stop loss in place.

 

[tech/a]

Re: Stop Loss is not always your friend....

Found this thread
Seems to be appropriate

R/T
I question whether you can paint the issue with a broad brush
What about capital base and risk of ruin as pointed out particularly in a leveraged instrument.
I'm sure Barclays would have liked a stop loss on their currency floor.

The question of opportunity cost where you flounder under your buy price and bottom draw your trade.

I'm sure overtime this question/statement will have a number case studies and supportive documentation.

I personally find using a Breakeven stop helps my mental attitude towards as trade--- particularly when I can't stand more than an hrs screen time. My own testing has shown the addition of stops to be beneficial.

I'd like to investigate portfolio stops and index stops/time stops more even comparing the constituents of a portfolio to it's composite chart to increase performance.

Trailing stops are another issue again
Along with timeframe.
Both trading and holding timeframes
Don't know all the answers but hope to be a lot closer throughout this year.

It's not a priority but definately a question I'd liked answered for a number of reasons
The obvious is v profit.

 

[DeepState]

Re: Stop Loss is not always your friend....

Found this thread
Seems to be appropriate

R/T
I question whether you can paint the issue with a broad brush
What about capital base and risk of ruin as pointed out particularly in a leveraged instrument.
I'm sure Barclays would have liked a stop loss on their currency floor.

The question of opportunity cost where you flounder under your buy price and bottom draw your trade.

I'm sure overtime this question/statement will have a number case studies and supportive documentation.

I personally find using a Breakeven stop helps my mental attitude towards as trade--- particularly when I can't stand more than an hrs screen time. My own testing has shown the addition of stops to be beneficial.

I'd like to investigate portfolio stops and index stops/time stops more even comparing the constituents of a portfolio to it's composite chart to increase performance.

Trailing stops are another issue again
Along with timeframe.
Both trading and holding timeframes
Don't know all the answers but hope to be a lot closer throughout this year.

It's not a priority but definately a question I'd liked answered for a number of reasons
The obvious is v profit.

Oh Sh!take mushrooms. I can feel a world of pain coming my way.....

I'll engage as part of a Coalition of the Actually Willing. I'm going to need to hear from at least one person in each of:

• behavioural finance; and
• options / quantitative finance who can do and verify stochastic modeling and speak Greek.

Surely they are out there. Whether they are prepared to suit up is another thing.

If Sinner would come out of retirement, that would be good. I'd share a foxhole with that guy.

This discussion tends to devolve into something like religious belief where the evidence suggests that matters that are untestable will just consume 99% of the energy. I have zero interest in that. One of the rules of engagement here is that any debate that might develop requires tangible evidence for assertions to stand...not just leaps of hand wave type 'logic' (I've been involved in too much of that utter nonsense from illogical self appointed logicians).

Even still, this is a non-binding commitment subject to further due diligence and a cooling off period. It's got regret written all over it.


Tech/A, the above is not any disrespect to you or your abilities. I've never interchanged materially with you.

 

[burglar]

Re: Stop Loss is not always your friend....

This is how you get off.
All you have to do is use it.

My preferred default.

 

[tech/a]

Re: Stop Loss is not always your friend....

Fair enough.

 

[DeepState]

Re: Stop Loss is not always your friend....

Found this thread
Seems to be appropriate

R/T
I question whether you can paint the issue with a broad brush
What about capital base and risk of ruin as pointed out particularly in a leveraged instrument.
I'm sure Barclays would have liked a stop loss on their currency floor.

The question of opportunity cost where you flounder under your buy price and bottom draw your trade.

I'm sure overtime this question/statement will have a number case studies and supportive documentation.

I personally find using a Breakeven stop helps my mental attitude towards as trade--- particularly when I can't stand more than an hrs screen time. My own testing has shown the addition of stops to be beneficial.

I'd like to investigate portfolio stops and index stops/time stops more even comparing the constituents of a portfolio to it's composite chart to increase performance.

Trailing stops are another issue again
Along with timeframe.
Both trading and holding timeframes
Don't know all the answers but hope to be a lot closer throughout this year.

It's not a priority but definately a question I'd liked answered for a number of reasons
The obvious is v profit.

Hi

Let's try this.

I think a lot of the issues on this discussion boil down to two things. If we can find common understanding on these points, I think we'll have a good chat.

Point 1: What makes money? What is risk management?
Point 2: Single outcomes are just one sliver of a probability distribution and says nothing about it other than the fact that it was possible.

Point 1 is important for definitional purposes. We can deal with Point 2 later.

I will state what I take 'signal' to mean and what 'risk management' means. If your view differs, that's fine, but we need to make sure we understand what each other is saying and what our conceptual framework looks like.

A 'signal' is the attempt to discern market movement. It is a directional prediction on something. The signal has power if it actually predicts accurately to some degree. It can be worthless if it has no predictive value at all. Worse, behavioural biases can lead signal value for investors to be negative. A signal can be anything that purports to be a prediction. It can be the length of skirts to a 50 page valuation or 1 million lines of code in a neural net algo, to a 20% Flipper. It doesn't matter what generates a prediction for these purposes. A signal is a predictor. If you give up, your predictor goes to zero.

'Risk Management' is any activity which determines position sizing. Risk management does not make money. It does not have alpha. If your signal is static electricity, no amount of risk management will improve your expected return. It can change the shape of your probability distribution, but it cannot change the expected return. In other words, with no ability to know where the markets are going at all, you have no expected return. Just whacking a 5% stop on it doesn't add any value whatsoever in terms of expected outcome. It just changes the pathway. Setting stops, trailing stops etc. just changes the pathway, but not the expected trajectory of the pathway. I call this bending/reshaping the distribution. You can change position sizes, implement different ones in rotation each Thursday...same deal. No change in expected outcome.

Right at this time, I am only talking about what makes return and position sizing as two different concepts that are involved in the process of trading/speculation. Let's not step into psychological matters quite yet.

Over to you.

 

[tech/a]

Re: Stop Loss is not always your friend....

My opinion?
I'm a builder not a financial whiz.

I have a number of areas I work
With for my long term financial
Security.

So is this a general or specific chat.
With regard point one.

Specific as in Trading only.