Stop-Loss strategies

[wayneL]

Forgetting to cancel a stop loss order when you close out a position. Then it later gets triggered opening you a new position in the opposite direction of the original holdings.

Its funny when it happens and makes you money.

Funnily enough, I'm in profit overall on the "forget to take your stop off" strategy. But of course, pure luck and way too scary.

 

[meganut]

Forgetting to cancel a stop loss order when you close out a position. Then it later gets triggered opening you a new position in the opposite direction of the original holdings.

Its funny when it happens and makes you money.

Please forgive me but I'm still not getting this, if you close out a position (ie. sell your shares) how can the stop loss get triggered (as in sell something you have already sold) and open a new position.

I need another more detailed example please.

 

[prawn_86]

Please forgive me but I'm still not getting this, if you close out a position (ie. sell your shares) how can the stop loss get triggered (as in sell something you have already sold) and open a new position.

I need another more detailed example please.

Ok MN i'll try my best.

Using round, unrealistic figures for ease.

You buy X shares at $1.10, with a stop at $1. The price rises and you sell your full amount of X at $1.50 (or whatever). You dont take your stop out for selling those X shares at $1.

the SP then falls to $1 and the system will automatically sell (or open up a short position) for those X amount of shares from originally.

So by leaving your stops in, if they get hit, you will take an opposite position to what you originally had.

 

[chops_a_must]

Please forgive me but I'm still not getting this, if you close out a position (ie. sell your shares) how can the stop loss get triggered (as in sell something you have already sold) and open a new position.

I need another more detailed example please.

Say when trading futures, you manually close out your trade, but your stop is still active if you don't cancel it. So effectively you get a reversal of your trade at the original stop price.

I've done this a couple of times... and get paranoid that someone is watching what I am doing from a distant computer laughing at me! Lol!

I've learnt to adjust the stop from the bracket orders, rather than have a new order.

 

[Trembling Hand]

Most day traders trade with bracket orders.

That is when they buy something at say $10 you then put in a sell order at your profit target say $11. But also a linked stop loss order to sell if your stock falls below $9.50. What happens is that if your target order is hit @ $11 your stop order is automatically canceled. Or your target order is cancelled if you stop loss order is triggered.

But some times if you are not using linked orders or One Cancels the other when your target is hit you sell out but forget to cancel the stop order at $9.50.Then the stock falls back to $9.50 and triggers the forgotten order you are now short the stock that you were just long.

 

[Aviator33]

Please forgive me but I'm still not getting this, if you close out a position (ie. sell your shares) how can the stop loss get triggered (as in sell something you have already sold) and open a new position.

I need another more detailed example please.

Not sure how the other guys make the mistake but for me:

Once I enter a position I create an OCO (order-cancels-oder) pair. So for example (forget risk management, keep it simple), say I buy a stock at $10:

• I create a take profit (sell order) at $11
• I create a stop loss (sell order) at $9

So with an O-C-O, once one order triggers it cancels the other. But things change, I forget to adjust my stops and just decide on the spur of the moment to sell and get out. Only problem is, my OCO orders are still in the system to Sell (short) at $11 and sell (short) at $9. Price rises to $11, triggers my order and BAM! I'm in the stock at $11.

Clear as mud?

Cheers
AV

p.s. WOW looks like 3 others beat me to it! Why don't we have a life outside of ASF?

 

[Trembling Hand]

That shoud do it boys. I was a bit to slow :

 

[Trembling Hand]

p.s. WOW looks like 3 others beat me to it! Why don't we have a life outside of ASF?

Where is your Valentine's??

 

[Aviator33]

Where is your Valentine's??

HAHAHAHAHA, very good TH. But we celebrate "V" day on the 15th. Don't ask me why, something about not being so comercial, I just nod and say "yes dear". Plus she's on night shift...so what's your excuse? :

Cheers
AV

 

[prawn_86]

Where is your Valentine's??

Mine is watching Lost.

I cant stand that show

 

[Aviator33]

Mine is watching Lost.

I cant stand that show

**GROAN***

I second that Prawn

 

[chops_a_must]

Where is your Valentine's??

I can't afford to have one, and trade.

 

[Aviator33]

I can't afford to have one, and trade.

LOL, I hear ya. Got to get "creative" this year....

Cheers
AV

 

[Trembling Hand]

I can't afford to have one, and trade.

What do you mean, I need a girl.
At least there will be one in the house with money at the end of the week.

 

[julius]

Do you guys use a front end for IB ?

 

[Trembling Hand]

Ninja Trader for charting and watch list etc.
IB clunky old DOM for executions.

 

[julius]

What's DOM?

 

[Trembling Hand]

Depth Of Market. TWS book trader.

 

[julius]

ah i see ...

I just want somthing that will place entry, stop, and profit target all in one go.

all the right clickin in TWS is driving me nuts

 

[Trembling Hand]

ah i see ...

I just want somthing that will place entry, stop, and profit target all in one go.

all the right clickin in TWS is driving me nuts

Use the DOM with a Bracket order.