January 9, 2008
Stop and Stop-Limit Orders
I almost always use a stop-limit order to enter a position and always, always, always have a stop order in place to exit a trade if it goes bad.
- A “Stop” order becomes a market order when the chosen stop price is “triggered”
- A “Stop-Limit” order becomes a limit order when the chosen stop price is “triggered”
- Stop and Stop-Limit orders are “triggered” when a trade prints at, or through, the user’s stop price
And keep this firmly in mind:
“In a volatile market, there can be no guarantee that the executed order will be near the specified price. That is, the market price may be moving so rapidly that it moves through the specified price. The broker’s only obligation in that case is to execute the stop order at the best price available.”
Interactive Brokers offers some pretty sophisticated Stop Trigger Methods that you should be aware of if you’re a client.
Cat: | Time: 5:05 pm (utc+8)
January 9th, 2008 at 10:15 pm
Voice of inexperience here but shouldn’t there be some provision for “confirmation” of the trade entry and not just that it hit the price target?
January 10th, 2008 at 6:55 am
Bob: Sorry, I don’t understand the question … what kind of confirmation did you have in mind?
January 10th, 2008 at 7:12 am
Chairman: not sure exactly but maybe remaining beyond the trigger price for a period of time. Take today’s pick as an example. It hit the trigger then bounced to hit the stop. I’m just wondering if something else might help confirm the trade direction on these picks. P.S. I was not in APOL today dang it.
January 10th, 2008 at 8:04 am
Bob: You’d have to be sitting in front of the screen to employ some kind of “time delay” … I don’t know of any order execution software that has a built-in time delay once an order is triggered. Cigna traded a penny below the entry level, so I’ll record it as yet another unfortunate whipsaw loss — it happens. APOL stopped out long ago, no?
January 10th, 2008 at 8:21 am
CM: yes on APOL
Bob: as far as I know, no platform can do that but of course you can do it manually….
January 10th, 2008 at 9:51 am
William: That’s what I’m trying to do I think. The box is on to something I am just trying to see if I can trade with it. I’m batting 50% and a little better than break even so far.
January 10th, 2008 at 10:43 am
how do you have tradebook on bloomberg? i was told its for QIB clients only…. institutions mostly or manybe some money managers pool accounts and use it? i tried to get it when i left work and they said i needed 50 million in assets to trade through their platform
January 10th, 2008 at 11:20 am
Tim said:
“i tried to get it when i left work and they said i needed 50 million in assets to trade through their platform”
So what are you suggesting, that Chairman Maoxian has less than $50 mil in assets ?
They/we don’t call him ‘The Chairman’ for nothing. :)
January 10th, 2008 at 11:31 am
@Tim: No idea what QIB is, Qualified Institutional something? I’m just using the Tradebook platform as an example — almost all brokers (Ameritrade, Interactive Brokers, TradeStation etc.) offer stop and stop-limit orders.
@Todd: I don’t have 50 million… yet. :-) (And if I did, I’d still be wearing my 10-year-old sneakers and have a bad haircut.)
April 2nd, 2008 at 1:12 am
can a broker sell your shares, if for example you set a stop limit at, lets say $140.00 but the stock never hits the $140.00. could they broker still sell your shares at lets say $144.00?
April 2nd, 2008 at 6:27 am
Rob: If the stop and the limit order are both set at $140 and price never goes there, then no, the order will never trigger. Be aware that you can set your stop and limit prices at different levels, i.e. stop $140, limit $140.50, or something like that.
April 2nd, 2008 at 7:01 am
i was sold out by fidelity. i put a stop limit at 143.00 then cancelled the order and re-entered the stop limit at 140.00. fidelity sold my shares at 144.00. i called them and they told me that when you enter a stop limit on a stock as in my case they told me that when the stock gets close to the order price, in my case she told me they got the best price for me. the stock never went to my order of 140.00. at the same time the stock went up over 85.00 points over night. something seems strange. time for a lawyer..any advise? i would appreicate it.
April 2nd, 2008 at 7:24 am
Rob: Which stock? Which dates? Details? I need to look at a chart.
April 3rd, 2008 at 4:58 am
the stock was “FSLR” the date was 11/8/07 the stock jumped 85 points and i was left with my pockets hanging out..really not cool. i am seeking legal action. i think i might have a good case. as far as i was told by friends here and through other brokers, the stop limit order has to be triggered in my case i had a stop limit of 140.00 and i was sold out at 143.00.. WOW!!!
April 3rd, 2008 at 10:22 am
Rob: First Solar, eh? So you were long the stock and had a stop loss order at 140 in place with the broker that triggered and filled on 11/8/07? What was the time-stamp on the executed order? Did it happen after hours? I show a low of 141.49 on 11/5/07 but nothing else anywhere near 140 around those dates. Talk to a lawyer I suppose, assuming it’s worth your while.
August 1st, 2008 at 5:31 am
C. Maoxian: Be aware that you can set your stop and limit prices at different levels, i.e. stop $140, limit $140.50.
RAD: So if you were expecting volatility or a whipsaw, you would set the stop below the limit, right? Say, stock is at 42.50, your stop could be 40 with a limit at 41? It would only sell then, if the price went to 40 and back up to at least 41?
August 1st, 2008 at 7:24 am
RAD: Yes, but that’s a pretty odd order, stop 40 limit 41… the point of the stop is to get out as price goes against you. In the case you describe, you might get stuck as your 41 limit order to sell just sits there and price goes 39 38 37 36 etc. Don’t try to be too clever, just get out.