Is this what you call slippage?

[jkaus101]

Hi all,

I entered a trade for ARP on 15 August with a stop loss (non-guaranteed) and got stopped out a few days later.

When I was stopped out I checked the trading log and had these two messages:

Closed stop loss position: 11 ARP with strike at 9.36, &
Completed: sold 80 ARP at 9.25

Considering that my stop loss was at 9.36, does that mean that slippage occurred?
If so, is this usual, and does that mean the rest of the trade was sold/fulfilled at the next available low price?
Are there tactics used (besides having a better entry) to prevent slippage

Sorry if this is a stupid question, I just wanted to be sure.
Justin

 

[skc]

Hi all,

I entered a trade for ARP on 15 August with a stop loss (non-guaranteed) and got stopped out a few days later.

When I was stopped out I checked the trading log and had these two messages:

Closed stop loss position: 11 ARP with strike at 9.36, &
Completed: sold 80 ARP at 9.25

Considering that my stop loss was at 9.36, does that mean that slippage occurred?
If so, is this usual, and does that mean the rest of the trade was sold/fulfilled at the next available low price?
Are there tactics used (besides having a better entry) to prevent slippage

Sorry if this is a stupid question, I just wanted to be sure.
Justin

Justin,

Yes that's slippage. You can't always prevent slippage, but you can sometimes managing them for better outcome.

- Know the market depth of your stock. Is it thin with wide spread or is it thick and liquid? Take that into account with your position sizing. ARP is a thin stock at the best of times so you shouldn't really be surprised by slippage.

- Know how your broker work the stop order. Is the stop triggered by the bid, the ask, or last? Does the broker place at market order, or limit order once the stop price is triggered? Is there a chase limit?

- Watch the share price yourself - not always possible unless you are glued to the screen... but you can focus on the market depth and decide if you can get a better exit than otherwise. E.g. Your stop is $9.36, but there's actually 20,000 shares at $9.36. Just because the last trade was 100 shares sold into the bid, you might want to hold the position if there are no sellers under $10. Alternately, you can just set an alert at the stop price, as opposed to actually trigger an order.

- Be aware that you can get slippage from spread, and you can also get slippage from gaps.

 

[jkaus101]

Justin,

Yes that's slippage. You can't always prevent slippage, but you can sometimes managing them for better outcome.

- Know the market depth of your stock. Is it thin with wide spread or is it thick and liquid? Take that into account with your position sizing. ARP is a thin stock at the best of times so you shouldn't really be surprised by slippage.

- Know how your broker work the stop order. Is the stop triggered by the bid, the ask, or last? Does the broker place at market order, or limit order once the stop price is triggered? Is there a chase limit?

- Watch the share price yourself - not always possible unless you are glued to the screen... but you can focus on the market depth and decide if you can get a better exit than otherwise. E.g. Your stop is $9.36, but there's actually 20,000 shares at $9.36. Just because the last trade was 100 shares sold into the bid, you might want to hold the position if there are no sellers under $10. Alternately, you can just set an alert at the stop price, as opposed to actually trigger an order.

- Be aware that you can get slippage from spread, and you can also get slippage from gaps.

Thanks alot skc! I'll ask those q's of the broker and see what the outcome is.

Justin

 

[jkaus101]

skc, how would you define a thin v liquid stock? Is there a certain number, eg 70000 shares a day (just pulled that out of the air) that means it's liquid? or is it relative to the actual stock? is it just top 50 shares that are liquid?

 

[skc]

skc, how would you define a thin v liquid stock? Is there a certain number, eg 70000 shares a day (just pulled that out of the air) that means it's liquid? or is it relative to the actual stock? is it just top 50 shares that are liquid?

Depends on your position size and the sort of range you are working with.

E.g. If you are buying 10,000 shares and looking for a 25% move, a market depth with 8000 share in the next 3 levels is probably good enough from a "no major slippage" prespective.

But if you are buying 250000 shares on the same market depth, you'd be toasted trying sell in one lot.

Total volume per day is not the key (although important) - the volume at the price level you want is what you need to look at.

 

[joea]

in the book "The NEW SELL & SELL SHORT" by Elder.
There are 3 formula's.
1 The Buy Grade.
2 The sell Grade.
3 The Trade Grade.
They cover slippage and grade it.

And as I am such a good fellow and have posted those before, I do not intend to do it again.
For newbies, get off your **** and read the posts.
Or buy the book.
joea p.s. and you have got me on one of my better days.

 

[jkaus101]

Thanks guys.

I've got that book joea - currently reading Trade like a casino atm, but will make that next on the list. I'll find that post of yours.

skc, thanks for the great example, i understand that! really appreciate it.

Cheers,
justin