Pre-Market bid able to trigger market stop loss??

Discussion in 'Order Execution' started by curltron, Oct 30, 2010.

  1. curltron

    curltron

    Not long ago I had shares with a stop loss set at $.86 while the stock was trading at $.93+. The following morning, immediately when the market opened, my shares were sold at $.92.

    Now I am completely aware that it is the bid which triggers these stop loss orders, not the selling price, but after disputing this trade filing a SEC complaint, my brokerage Merrill Lynch is still denying my claim, while admitting my stop loss was triggered from a Pre-Market bid, before the market opened. Is this common practice? Is this something worth pursuing further into arbitration?
     
  2. You should have usd the stop loss order that's only good between certain hours

    :)
     
  3. curltron

    curltron

    Whoa wait a sec though, wasn't my stop loss order only good from 9:30AM, Market Open to Market close?

    It traded at 9:30, so shouldn't it be based on a bid at 9:30 only? I mean there was an even greater premarket spread much earlier, if it was taking into account bids earlier in the market close, it should be trading when they occur, correct?
     
  4. NoDoji

    NoDoji

    As far as I know, stop losses on stocks can only trigger during regular trading hours. If the market opened with price at your stop loss level, then it could trigger, but not during extended hours.

    Is this something that's dependent on the broker? I'd like to know, because I still swing trade stocks in my IRAs and with that broker stops are only active during RTH.
     
  5. NoDoji

    NoDoji

    That is certainly my understanding. One of the brokers I use specifically states that. The other broker allows stops after hours but only for futures as far as I can tell because stops don't trigger in the extended hours sessions for stocks, only for futures.

    What it comes down to is I've never had a stop trigger on a stock until RTH, and have always had to use limit orders after hours.
     
  6. curltron

    curltron

    Well I can tell you, I'm furious with them right now then. My broker did acknowledge my stop loss was good only during RTH, but they seem to claim there is a difference between triggering stop loss orders from bids before the market open and "moments before" the market opened. To me, I don't understand how any trigger with the word "before" open in it could ever be valid for a strict market order.

    Last time I spoke with them they claimed the bid that triggered my order was around 9:28 AM, which is a whole 2 minutes. Computers these don't make lagged decisions 2 minutes behind unless their insufficiently programmed.

    But here's the real question, even if a RTH stop loss was made based off a bid at 9:29:59, technically pre market, isn't it still invalid? Worth me spending the money to arbitrate?
     
  7. joe4422

    joe4422

    Normally you need to click an input field that says allow stop to be triggered pre market. As a general rule of thumb, I never trade stock under a dollar with a stop anyway, because the spread can widen as far as the market maker wants it to.


    You need to learn exactly how your account works, and ET does not set the policy for your brokerage. Talk with them, find out exactly why it triggered so you'll know for the future. If they're cheats, close your account and move it some where else, and keep up with your complaint.


    Kindergarten 101 is now over.
     
  8. curltron

    curltron

    Wow, way to not come off as a complete elitist ass. Listen, I've talked with my brokerage. I completely understand where they stand. I'm obviously not very experienced, that's why I'm here asking people on ET who are in these situations. I need help understanding if either being completely BSed by my brokerage here or they can legitimately do this and get away with it. They act like this is common practice, and I don't want to be wasting my money on arbitration as I don't have much extra to spend. I've gotten with the SEC who is obviously no help, just forwards my complaint, offers nothing whatsoever on what is a legitimate complaint or not.

    Anyway, maybe I should have been more descriptive in the beginning. Unfortunately because I'm a new member apparently EVERY message of mine has to be screened still so it's been a pain in the ass to add anything to this discussion.

    Again, it was a Market only order, however brokerage claims it was triggered from a bid "moments before" open, and somehow this is justified. Based on your experience, is that justifiable answer? Worth disputing?

    Really appreciate any help relating to my real question!
     
  9. NoDoji

    NoDoji

    Again, everything I've been told by brokers is that stops only work during regular trading hours with stocks. If you can get something in writing otherwise, I'd like to know as well.

    A few moments or seconds before the open is irrelevant. It's if the price was hit on or after the open that would've triggered it.