Following the 8% suggested stop loss scenario, I set a stop on an ETF fund as a protection. The fund was trading at around 13 and the stop was at 12.6. During that craziness when the market went down 1,000 points, my stock went through the stop and was sold at $.13 for a substantial loss. My broker is investigating but doubts any adjustment will be made. If I had set a stop with a limit, this would have prevened that scenario. Do you suggest using a stop/limit as a "better" safety net?
Thanks.
Stop versus stop limit
(3 posts)
mike0711
MemberPosted 2 years ago #Donato
MemberHi Mike,
A stop limit probably would have protected you in that case, but not for the reason you might be thinking. Here is a likely scenario for what might have happened:Since the price was moving so fast, it would have blown right through your stop limit and the broker would have canceled the stop. Which means you would still own the ETF.
My guess is that you were in an ETF with a low volume. Most ETF's trade on low volume, and that is why I will not trade most ETF's. For example, look at the volume on things like XRT and XLF and compare that to whatever you were trading.
Also, until you have more experience, stay away from leveraged funds and funds based in futures contracts. Trading (or investing) is risky enough without inviting the risk in through your front door.
Good Luck
Posted 2 years ago #jhancock
MemberHi Mike:
I had four positions sell May 6 at my Stop price. It appears they would have sold anyway given how prices continued to decline later in the month. Here is how I use Stop-Limit in my trades. Once the ETF buy is executed. I put a 3% Stop price on the 200 EMA as downside risk protection. The Limit price is $0.10 below the stop.
Numerically it looks like this. The ETF is bought at 100.50 It's EMA is 100.00. Stop 97; Limit 96.90. In this situation your downside loss is just over 3.5% of your investment, including buy-sell commissions.
Posted 1 year ago #
