Stop Loss Triggering

[robertbanking]

Hello you wonderful and kind people that make up this forum. Hope you are doing well and enjoying your weekend.

I wanted to kindly ask regarding how tight stop losses are at triggering please. For instance as an example if i invested in Walt Disney (NYSE: DIS). The current price is around 102.50 USD. If i set the stop loss at 10% lower than the current share price 92.25 USD i wanted to know how this would kindly work please. For instance say if there was a sudden drop over an hour on some bad news from 102.50 USD to 82.50 USD how can i determine how close i would get to my stop loss of 92.25 USD please? Would this be quite tight so no matter how sudden the drop, this should trigger around the 92.25 USD mark please? If anyone could kindly help me with this it would mean the world to me and i would be forever grateful for your support.

Hope you continue to do extremely well with your trading and investing. Thank you to everyone who is an amazing asset to these wonderful forums. All the very best to you.

[mc2fool]

Quite simply, there is no guarantee. Most (all?) brokers will say something like ii's:

"Please be aware that the price may be considerably lower than the stop loss limit if the shares drop in price dramatically. This is because once your stop loss price is triggered the order becomes a 'market' order."

https://www.ii.co.uk/help/trading/buy-or-sell-investments/order-types-automatically-buy-or-sell-at-a-certain-price

In fact, I had one broker (SelfTrade, as was?) that also had a lower limit on stop losses, so that you could avoid selling if the price suddenly spiked downwards. But basically in your example, the only thing you can be confident of is that it will sell at 92.25 USD or less.

[Dicky99]

I've only limited experience but I'd say if the price drops very sharply all bets are off as to what price you'll get. If buyers have to be matched with sellers and sellers are clamouring to sell, what chance of getting out at your stop loss price?
I've avoided stop losses since an occasion when I purchased a stock in the morning and simultaneously set a stop loss 10% or so below. Mid morning I received a text message to say that my stock had been sold much to my surprise. By the time I got home from work the stock had recovered and was in slight profit. It had fallen sharply very briefly shortly after I made the purchase. Bloody awful timing so I guess I must have done something to deserve it.

[Urbandreamer]

I don't use stop losses any more, however they don't quite work how you would hope.

For example, if you set the stop loss at 10%, it could easily pay out at a loss of 15%. Or not pay out at all.

Sorry, but that's how they normally work. Now if you were spread betting, you could ENSURE that 10%, or rather insure. You see insurance is also a bet, while the normal "stop loss" is an instruction to trade.

If they can''t trade until a loss of 15%, well it becomes a matter of if they think you actually want to accept that it wont recover quickly. They are trying their best for you but may get it wrong. That of course ignores if the exchange halts all trading!

Now bets are a really bad idea over the long term. They have a cost to keep them going. Yes I use to spread bet.

However you CAN guarantee a stop loss. It costs a bit more, but insurance is a bet.

Some might argue that where stop losses really count is the likes of my investment in SMT, It reached over £15, but is now just above £6. I happened to reduce my holdings at about £11 and £14, but still have holdings. Following them down from the high point to today.

Stop losses are a matter of opinion, a bit like betting.

Possibly I should point out that were you BETTING upon bank shares in the financial crash, the stop loss would pay, even though shorting bank shares was prevented by the government, or if the shares stopped trading it still paid. As I said, betting is not normally a good choice, just good in some circumstances. Just like if your house burns down, the "bet" will pay out.

I should also state that it is possible to use "bets" or "futures" to "Hedge" against things going wrong. This is where the term Hedge funds comes from. It's what they do. Investing long and betting short. However it is NOT easy to do. Professionals regularly get it wrong.

[Dod101]

Hello you wonderful and kind people that make up this forum. Hope you are doing well and enjoying your weekend.

I wanted to kindly ask regarding how tight stop losses are at triggering please. For instance as an example if i invested in Walt Disney (NYSE: DIS). The current price is around 102.50 USD. If i set the stop loss at 10% lower than the current share price 92.25 USD i wanted to know how this would kindly work please. For instance say if there was a sudden drop over an hour on some bad news from 102.50 USD to 82.50 USD how can i determine how close i would get to my stop loss of 92.25 USD please? Would this be quite tight so no matter how sudden the drop, this should trigger around the 92.25 USD mark please? If anyone could kindly help me with this it would mean the world to me and i would be forever grateful for your support.

Hope you continue to do extremely well with your trading and investing. Thank you to everyone who is an amazing asset to these wonderful forums. All the very best to you.

Just as a matter of form, you have been signed up to this forum since 30 March 2022 and are thus a full member of this forum. Why do you address the forum as though you were an alien outsider? You will get more out of it (in my experience anyway) if you embrace it as a member. As well as asking questions try expressing a few opinions yourself as well. That way, you may help others. Opinions expressed are just that, opinions and you are entitled to them as much as anyone else.

Dod

[vand]

A gap move will trigger a stop loss order at the price when the market begins trading again, so you can certainly end up selling well below whatever stop loss price you set.

IMO stop losses are for traders, not investors, so if you are trading it's pretty much up to you to figure this stuff out.

[GoSeigen]

Just to add to all the good answers so far, if it isn't obvious already, stop losses are misnamed -- they should be called "guaranteed loss" orders.

A stop loss basically means "I want to sell if the price is low enough, I don't care how little money I receive for my shares, just offload them please." Which is a pretty dumb way to invest or trade IMO.

I'd strongly encourage you to use limit orders instead, whose meaning can be summarised thus "When the price gets high enough please sell, I don't care how high a price I get just flog them if anyone is stupid enough to pay me the price I'm demanding".


GS