Viewing other people's stop losses

[hitmanlam]

Here's another interesting question i've always thought about.

I've just put a very very tight stop loss on a stock. Now i was wondering if other ppl can actually see what i've set my stop loss at and maybe take advantage by diliberately lowering their bids and triggering my stop. I've heard of big institutions selling down stocks to trigger stop losses and then buying them back at a lower price.

Is this possible? Is there a 'market depth' for stop losses that institutions can look at?

I reckon it's highly unlikely. But i always here stories of institutional investors taking strategies to beat us little guys. eg. pumping and dumping, price capping stocks like INL.

How much power to these institutional guys have? I'm assuming HEAPS with the amount of cash backing them!

 

[MichaelD]

Re: Viewing other ppl's stop losses

Now i was wondering if other ppl can actually see what i've set my stop loss at and maybe take advantage by diliberately lowering their bids and triggering my stop.

No, they can't see it but if it's in an obvious place where other traders may also have their stop loss, smart traders will be aware of where it probably is and may well have a strategy to trade against it.

 

[theasxgorilla]

Hitman,

Are you trading via an online broker or a CFD provider?

 

[hitmanlam]

Online

 

[joslad]

I don't know if your stops are visible or not to on-line brokers, (incl CFD providers), but the assumption I would make is that they are visible. If they are placed electronically into webiress or MM systems then it would be technically possible to view them. I don't think brokers have a reputation for having high morals - do they?

I day trade the asx and never set electronic stops.

Stephen Nassar in his book "Rules of the Trade" talks about this very subject. He is referring to the US markets, which may be different to the asx setup, but I will type a few paras from his book below. He says stops are visible and are in fact sold onto wholesale market makers.


Here's what he says:

The two methods for setting stop levels are mental and electronic. Mental stops are simple price levels you set in your mind that, once met, prompt you to exit or enter the trade. This is the mechanism of most professional traders who monitor their positions closely throughout the day and don't want to reveal to the market where their entry and exit points are.

A stop loss price represents the worst case scenario for getting out of trades when things do not go as planned - it represents your threshold for pain that you are unwilling to exceed. The reason for mental stops is that, as in poker, you never want to show your hand. Think of market makers and online firms that sell order flow to wholesaling market makers as "secret handshake" poker partners. They love to know your buying and selling intentions so that they can trade against them or provide liquidity with them. Telling a market maker where you want to trade your stock is showing your hand. Many argue "Whats the difference? I wanted to trade at that price anway". The problem is that there is little to be known about the market condition at these literal price points where stops are set, since stops usually represent the market condition at some time in the near future. I would much prefer to anyalise the market condition once my stock reached this price point to decide if it is to my advantage to make the trade. Relying on stops, without being present when this price criterion is met that triggers the stop, to me, is like getting up from the poker table and telling your opponent to pick up a king of hearts for you while you are getting a drink. What transpires in hands while you are away will affect you dramatically if you still want the king of hearts, not to mention the fact that you told your opponent where you want to trade cards. In the market the same is true for the day trader. I dont want some market maker to know where I want to buy or sell stock until I show it to them as I hit their bids or lift their offers. This is why mental stops are important. I program my mind where I want to buy such as the case with a buy stop, or where I want to sell, such as a the case with a sell stop. Obviously, limit order protection can be added to stop orders if stops are to be used.

Electronic stops are now available on EDAT systems that allow the trader to set these limits on his or her own PC without sending the order to the market maker or broker who may trade against them. The local PC holds the order electronically and fires the order when the conditions that you set are met. This keeps the order safe and sound on your PC without any possible manipulation. ...... etc


ends

I would recommend his book - even though its geared up for the american markets, its equally applicable to trading the asx.