Stop Loss Question

[stargazer]

Hi

If i buy a stock xyz at say $2.00

Stop loss on it at say $1.80

Nest day stock xyz opens at $1.65 Does it get sold?

Cheers
SG

 

[Realist]

Once it hits $1.80 or lower it gets put on the market.

If it opened at $1.65 and there was a buyer at $1.65 then yes it would be sold for $1.65

 

[Route 66]

Hi

If i buy a stock xyz at say $2.00

Stop loss on it at say $1.80

Nest day stock xyz opens at $1.65 Does it get sold?

Cheers
SG

Not necessarily stargazer ---- is that $1.80 your trigger or limit price for the stop loss order?

If your trigger price for the stop loss is $1.80 but your limit price is for example, $1.70 then your stop loss order would have placed a sell order at $1.70 and it will stay there until buyers bid up to $1.70+ or until the order expiry date.

With a trigger price of $1.80, your sell order would only be executed on market open if your limit price was at or below $1.65

 

[stargazer]

Hi

Thanks for yor replies although i am not quite clear on trigger and limit. On E Trade they call it a conditional order with a whole host of variations.

What i am trying to achieve is:

I want the stock to be sold at $1.80 not lower than this.

From waht you are saying if it opened at $1.65 it would be put on the market which is not what i want that would be at market wouldn't it?

So how does one protect themselves from the stock being sold below the $1.80.

Hope that makes sense.

Cheers
SG

 

[Realist]

I want the stock to be sold at $1.80 not lower than this.

You can not do this sorry. You either sell at the market price or you hold.

Say it closes at $2.00 on Monday afternoon. You do not want to sell so you've held it.

Then overnight there is terrible news, the stock may open on Tuesday morning at $1.20 and fall further from there over the next few weeks.

In this case you can not sell at $1.80. No buyers obviously.

And according to the theory of using stop losses you need to sell at $1.20 before you lose anymore.


Stop losses don't stop losses - they just reduce them.

Triggering the sale in the case abovce at $1.20 may be a good move. And it is your only choice.

 

[stargazer]

Great thanks Realist its clear to me now.

Cheers
SG

 

[GreatPig]

You can not do this sorry.

You can on Etrade.

This Conditional Order is for a stock falling in price. When the Trigger Price is reached, we will vet your order and place an order to market for you. ... The order will not trigger if the stock price remains above the set Trigger Price. As part of this example you can also set a Lower Limit Price. If the price reaches or passes the Lower Limit then your outstanding order will not be triggered.

GP

 

[Realist]

You can on Etrade.


GP

Please explain using the scenario I used.

$2.00 to $1.20 overnight.

How you can sell at $1.80??

 

[bluebell]

Hi

Thanks for yor replies although i am not quite clear on trigger and limit. On E Trade they call it a conditional order with a whole host of variations.

What i am trying to achieve is:

I want the stock to be sold at $1.80 not lower than this.

From waht you are saying if it opened at $1.65 it would be put on the market which is not what i want that would be at market wouldn't it?

So how does one protect themselves from the stock being sold below the $1.80.

Hope that makes sense.

Cheers
SG

With commsec you set up a conditional stop loss order of which there are a few variations.

In this case set the trigger price at or above $1.80 and your limit price at $1.80

As soon as as a transaction is done at your reigger price the conditional order is then triggered and places a sell order into the market like normal at whatever your limit price is. This sell order is then treated just like any other normal sell order in the market.

eg....

Share price is currently at 1.95

Trigger = 1.85

Limit = 1.80

So as soon as the share price reaches 1.85, your sell order at 1.80 is then put in the market.

In rapidly falling stocks, say after your trigger is executed at 1.85 but the next transaction is at below your limit of 1.80 then your order will stay in the market and you have to hope the share price comes back up to 1.80 b4 the order's expiry date or you can lower your sell limit.

So in this example, when the share price hits 1.85 your sell order at 1.80 is placed in the market. If the next transaction is below 1.80 (say 1.65 as your scenario) then your sell IS NOT EXECUTED and you'll have to wait for the share price to come back up or you can amend your sell limit lower.

But if after your trigger places your sell order at 1.80 in the market the next transaction is at 1.83 then more than likely your order will be included in that transaction and your shares would have been sold for 1.83 instead of 1.80

 

[MichaelD]

What i am trying to achieve is:

I want the stock to be sold at $1.80 not lower than this.

From waht you are saying if it opened at $1.65 it would be put on the market which is not what i want that would be at market wouldn't it?

So how does one protect themselves from the stock being sold below the $1.80.

This is an extraordinarily dangerous way to use a conditional stop loss.

The scenario;

You buy xyz at $2.
You put a conditional stop loss trigger at $1.80 with a limit of $1.80.

The next day the stock trades at $1.65. Your order does not execute.
The next day the stock trades at $1.45. Your order does not execute.
The next day the stock trades at $1.00. Your order does not execute.

You've just turned a 10% loss into a 50% loss.

 

[bluebell]

This is an extraordinarily dangerous way to use a conditional stop loss.

The scenario;

You buy xyz at $2.
You put a conditional stop loss trigger at $1.80 with a limit of $1.80.

The next day the stock trades at $1.65. Your order does not execute.
The next day the stock trades at $1.45. Your order does not execute.
The next day the stock trades at $1.00. Your order does not execute.

You've just turned a 10% loss into a 50% loss.

yes, setting the trigger and limit to the same value does increase your chances of your sell order to not be executed. But in a slowly declining stock in most cases it probably would still be executed.

That's why it's a good idea to set your sell limit a few ticks below your trigger price to increase the cjances your sell goes through and with a slight chance you might be lucky to eventually sell at aprice somewhere in between your sell and trigger values.

The sell limit is the absolute minimum your shares will be sold at and you always have the option to move the sell limit down in a rapidly falling stock if you like.

 

[kaveman]

Why have a stop loss if you are not going to use it?

 

[GreatPig]

How you can sell at $1.80??

No, of course you can't have it sell at $1.80, but if it's below the limit price, it won't sell at all.

GP

 

[Realist]

No, of course you can't have it sell at $1.80, but if it's below the limit price, it won't sell at all.

GP

Which defeats the whole purpose of a stop loss.

 

[GreatPig]

Well that's when you go WTF and turn your stop/loss strategy into a DCT (AIM) one and buy more shares instead

GP

 

[tech/a]

You dont set a limit on a stop loss its called slippage.

 

[pacer]

I use E-trade too.....was real biach trying to work out how it all worked when I first got on, as the help page is absolute crap....you'd think they would give detailed instructions!!!!!!!!......w%&*ers!!!!!!!!!!!!!!!!!

Now a slightly different question...I notice that occasionaly the bars on the graph go massively up/down occasionaly during the day, within a minute......I haven't seen it live, and wold like to see the bid/offer side when it happens but ....is this a stop-loss hit or a mistake.......

I want to know if my stop will be hit, with this anomally.....

I love this site...the best there is...and good people willing to share info.....

 

[bluebell]

Which defeats the whole purpose of a stop loss.

I think you are struggling with the concept of stop losses, trigger and limit prices and their variations.

No broker that provides conditional orders services will guarantee that all stop loss orders will be executed, especially in extreme cases when stocks plunge rapidly as per your example.

But the vast majority of price movements are fairly orderly and so conditional orders provide an automated means to cut losses or lock in profits and so are especially useful when someone is not able to watch the market closely.

I agree with GP because you can do it on commsec as well.

 

[pacer]

But is it just an anomaly on the graph or a genuine hit on the stop loss's...this is e-trade...is it just an anomoly on etrade or do all sites take a hit at the same time....I'm talking HUGE jumps of 2-15% then revert to thier origional price!....if you don't use etrade you may not have the answer I'm looking for....

thanks anyway

 

[Dutchy3]

Over the years I've kept the records of stocks that I have been STOPPED out of. As I take positions on margin on any number of occassions had I not exited at my stop I'd be out of this game ....

As I am wrong a good %age of the time STOP's have allowed me to surrive and prosper ... these days it simple is not an issue. If I'm wrong I'm wrong ... I'm just not passionate about dying on anyone elses hill ... get out and live and learn