Stop Loss Question

Discussion in 'Trading' started by jsmith, Jul 18, 2001.

  1. jsmith


    Would it be correct to sell a stock you are holding if it hits your stop-loss afterhours?
    I thought the answer was no because the price could be manipulated by aggressive traders in the low volumne.

    Yesterday (07/18/01), I bought MERQ at 38.10 around 13:00 and put a stop loss at 37.50. A risk of .60. I held over night for a few reasons.
    1. I wanted this to be a swing trade.
    2. Nasdaq made inside day and deeply oversold
    3. Nasdaq was strong and closed near high

    After hours, MERQ hit 37 before rebounding to 37.4.
    I did not take my stop hoping for a pullback rally at the start of today. It did not and I ended up selling at 35.00.
    My risk of .6 ended up costing me 3.10.

    That brings me to the question. Do people apply their stop-losses to after hours? This would've saved me 2 points.

    The problem is that MERQ on Wednesday (07/11/01) dipped under 38 (afterhours) which was where my stop-loss was but ended up going up to 43 the next day where I sold it. I did not sell it last time it dipped under afterhours and profited 5 points.

    The only conclusion I'm sure of is that I'm not going to attempt any swing trades during earning seasons because the earning factor is a big gamble. (Big up or big down) Going to close all positions at end of the day.

  2. mgregor


    First, you should be aware that there are no market orders on after hours trading. You can only exit your position with a limit order on one of the ECN's. This means you have to stay in front of your computer and monitor your position after hours as well.

    In general, trading after hours is much more volatile. Due to the fact that there are much fewer participants, stocks can more easily be moved up or down. Personally, I usually like to wait until the open and see if the price will rebound before I sell a position.

    Just make sure you don't hold too large a position overnight, just in case it gaps 10+ points in the other direction.

  3. jsmith

    you should definitly stop out afterhours if your stop price is hit.. no exceptions.. on days like today and yesterday when we have major earnings after the close it is very dangerous to hold overnighters anyway.. always protect your account with a stop.. and dont allow the one trade that goes slightly below your stop and then runs 10 points convince you not to keep your stops.. the one trade that you decide to "give some room" and runs against you 10 points will seriously dent your account.. in short, price is price afterhours or not..

    good trading

  4. tymjr


    If I hold overnight I trade with only enough contracts to allow for a wide stop. I try to allow for the worst-case scenario. I ALWAYS pull the plug at a predetermined stop. I can always re-enter if the position turns back in my favor. If the trade is still valid, I have specific rules that are designed for re-entry after a stop.
  5. dozu888


    $0.6 stop on a naz flyer like MERQ, is a little bit eh..... too tight ? (for swing trading)