Stop Loss Order

Discussion in 'Order Execution' started by ctrimble, Jun 4, 2011.

  1. ctrimble


    Can I really count on stop loss orders if my shares go down?

    Thank you
  2. Stop loss orders are NOT a guarantee. A stop loss is an order to buy or sell like any other order. In a liquid market, stop loss orders can work quite reliably (you get filled at or near your stop price). The less liquid the market, the less reliable the stop order. In other words, if a market is not very liquid, your order may get filled far away from your stop price (and you get screwed).

    If you provide specifics regarding what market(s) you're trading, perhaps someone with experience in that particular market can give you a more detailed answer.
  3. Depends on liquidity as the previous poster suggested, usually quite reliable give or take slippage.

    The biggest risk lies in unexpected gaps against you if swing trading.

  4. Another thing to keep in mind is that once your stop price is reached, your stop order becomes a market order and the price at which you sell may be much different from the stop price. This is especially true in a fast-moving markets where price changes rapidly.

    A last restriction with the stop-loss order is that many brokers do not allow you to place a stop order on certain securities like OTC Bulletin Board stocks or penny stocks.

    CMS globex supports native stop limit order, but not stop market order. Stop limit orders rest on the exchange servers and once the stop price hits, your order is entered into their que as a limit order -- all done near real time locally. Where as stop loss order sits on your broker's order servers, only after your broker sees a quote at the stop price will they transmit a market order to the exchange subject to their network and processing latency.
  5. Hello!
    I am a new man for forex and I know that the questions is new as the the world )..just wanna know, is is kind of level on which it would be better to put stop loss?
  6. bone

    bone ET Sponsor

    A 'stop loss' order is, electronically, a de facto stop-limit order. You are specifying an action to take (buy or sell), the triggering price, the quantity, and a variable range which you can (and indeed should) specify for which the order is to be filled.

    So, if I'm long 1 futures contract at 10, and my own personal 'stop-loss' level for that trade is 3, then I can set a SL Sell order at 3 for a quantity of one with a payup tic range of 2 tics. So, if the price 3 prints, then I will sell that one-lot at the best bid down to the price of 1 if necessary. If I miss those prices completely, then USUALLY there is a resting sell order for my one-lot at 1 (missed SL order composition depends on the exchange). If it's a really thin market by nature, you will want to specify a wider SL execution payup tic limit.
  7. Thank You bone for your reply.