Anyone use them? If not, how do you preserve gains, and prevent losses?
May 27th, 2020 12:36 pm
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So XYZ last traded at $50 and then there is no further buyer interest at all? Order book empty, no market makers? Account B doesn't have to exist in this example then. Account A just needs to throw out stink bids in order to trip your stop. If your stock is that illiquid what are the chances there's even a market for options? If you don't like putting in stops, you can set yourself up for price alerts so it's on you to pull the trigger if price hits your pain point.purplemonkey wrote: ↑ It's easy to lose big with stops though, isn't it?
Consider, for instance, a person with 2 accounts, or 2 people with 2 accounts. Stock XYZ is selling at $50. Account A sets up a buy limit order for 10000 shares at $5. Account B sells 5 shares at $5, partially filling the buy order. This results in a large drop in market price, albeit temporarily, which triggers any accounts with stops, and the rest of the buy order is filled.
Options seem to be the only solid way to protect investments, a sort of insurance cost paid every time contracts expire.
May 28th, 2020 11:20 am
You're right, I'm learning, and was referencing "stop hunting" phenomena described in this article:
May 28th, 2020 11:22 am
Not against stops. I'm trying to gain a better understanding though to be clear about the pros, and cons. I appreciate everyone's input.introspect wrote: ↑ So XYZ last traded at $50 and then there is no further buyer interest at all? Order book empty, no market makers? Account B doesn't have to exist in this example then. Account A just needs to throw out stink bids in order to trip your stop. If your stock is that illiquid what are the chances there's even a market for options? If you don't like putting in stops, you can set yourself up for price alerts so it's on you to pull the trigger if price hits your pain point.
Jun 1st, 2020 11:23 pm
This. Use stop losses for trading.
Jun 1st, 2020 11:42 pm
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Jun 8th, 2020 8:56 am
I was mulling this over while reading the "lessons learned" thread. So assuming I have a 10% stop loss set on my large ETF holdings and the market drops/crashes 11%. So I am now sitting on a stack of cash. Then what? Do I buy after the next circuit breaker trips? Or 2? Or will there be 3 big drops like in March? Could there be a fourth? Do I go all GIC's then for the rest of my life? Do I wait until it recovers and buy back at new all time highs?llpresident wrote: ↑ I’ve had zero stop losses on for years but I rarely trade. Although it’s easy to say “you can just buy it back” if you lose a position in a flash crash, you will likely not buy it back. What will happen in a flash crash is you will lose the position and it will run back up before you can buy your position back. While the crash is happening you will panic. Once it runs back up without you, you won’t want to buy it back at a loss. You may think it’ll go lower, but what if the bull market just keeps on chugging without you?
There have been multiple little temporary events where this could have occurred within the last 5 years or so. You may think you’re being sophisticated with a stop loss but when it triggers human psychology will end up interfering to your detriment.
I've seen you bring it up the Nasdaq example a couple of times now. I assume you had stop losses set in Jan/Feb...what were your re-entry points in March/April? Or did you go all cash after the first drop and you're still preserving capital? I'm trying to figure out how they might work for me, but without the benefit of a rear view mirror they seem to be just a different way of reacting and guessing what the markets will do next.zoro69 wrote: ↑ There are people commenting who haven't been around over time. this will happen again (it already has in cannabis)
"The crash that followed saw the Nasdaq index, which had risen five-fold between 1995 and 2000,, tumble from a peak of 5,048.62 on March 10, 2000, to 1,139.90 on Oct 4, 2002, a 76.81% fall. By the end of 2001, most dotcom stocks had gone bust. Even the share prices of blue-chip technology stocks like Cisco, Intel and Oracle lost more than 80% of their value. It would take 15 years for the Nasdaq to regain its dotcom peak, which it did on April 23, 2015."
Use a stop, always. Or be a noob, buy... and hold until zero