Simple question about stop losses

shortlist · 9 November 2009

G'day all

When you order a stop loss, does this instruct the broker to sell automatically at the level you instruct, or simply cause them to alert you that a price has been reached and leave it up to you to place a sell order?

Thanks for your time and hope all are keeping well - I've been a bit busy and unable to spend a lot of time on ASF!

ThingyMajiggy · 9 November 2009

Sell/Buy automatically at the price I select.

If I wanted an alert, I would choose Price Alert rather than Stop Loss.

shortlist · 9 November 2009

ThingyMajiggy said:
Sell/Buy automatically at the price I select.

If I wanted an alert, I would choose Price Alert rather than Stop Loss.

Thanks Sam - this is what I thought. What confused me was the Westpac conditional orders form on their online broking site which has an "alert by" facility (email or SMS) on it. If they were going to sell my stock automatically at a prearranged stop loss order, why would I need to be alerted? Also, they charge for these alerts.

cutz · 9 November 2009

Hi shortlist,

SMS alerts are just text messages that are sent when the stock hits a preset price.

BTW what do Westpac charge for these alerts ?

shortlist · 9 November 2009

cutz said:
Hi shortlist,

SMS alerts are just text messages that are sent when the stock hits a preset price.

BTW what do Westpac charge for these alerts ?

I'm just not sure as to the point of paying for an SMS alert to tell you your stock has hit the level that it is going to be automatically sold??? Why not wait till you get home and find out for yourself? I think it's 33c for SMS and 10c for email for each alert. I guess that's affordable for those that must know immediately. I guess you would then know your stock had been sold and could take another position much quicker thanks to the alert.

kam75 · 9 November 2009

shortlist said:
G'day all

When you order a stop loss, does this instruct the broker to sell automatically at the level you instruct, or simply cause them to alert you that a price has been reached and leave it up to you to place a sell order?

Thanks for your time and hope all are keeping well - I've been a bit busy and unable to spend a lot of time on ASF!

When a stoploss is hit, the broker will route your order to the market. But, whether they will get you out and at what price is another story. Etrade with whom I traded for over 7 years routed my orders to the market, 'At Market', meaning I was exited at the stoploss price or the next possible price below. Not all brokers do this however so you gotta be extremely careful when chosing a broker. Take Bell Direct for example. If your stop is hit with them, they route the order to the market "At Limit", meaning, that if there aren't enough buyers at your stoploss price, you won't be exited out of the trade. If the stock does down the crapper then tough luck, you could be up for a big loss. So always make sure you question these brokers like a damn witness before deciding to trade with them.

cutz · 9 November 2009

shortlist said:
I'm just not sure as to the point of paying for an SMS alert to tell you your stock has hit the level that it is going to be automatically sold??? Why not wait till you get home and find out for yourself? I think it's 33c for SMS and 10c for email for each alert. I guess that's affordable for those that must know immediately. I guess you would then know your stock had been sold and could take another position much quicker thanks to the alert.

SMS alerts, they're just a useless gimmick used by the big 4, perhaps it makes a beginner trader feel like he's/she's in tune with the market while sipping a latte`.

nunthewiser · 9 November 2009

cutz said:
SMS alerts, they're just a useless gimmick used by the big 4, perhaps it makes a beginner trader feel like he's/she's in tune with the market while sipping a latte`.

LOL . I use SMS alerts constantly in between my bewty sleeps etc , handy way of waking me up when something of intrest to me is happening ........ I drink out of a mug

kam75 · 9 November 2009

shortlist said:
I'm just not sure as to the point of paying for an SMS alert to tell you your stock has hit the level that it is going to be automatically sold??? Why not wait till you get home and find out for yourself? I think it's 33c for SMS and 10c for email for each alert. I guess that's affordable for those that must know immediately. I guess you would then know your stock had been sold and could take another position much quicker thanks to the alert.

I've used Etrade SMS alerts and found them to be spot on. But this was to check prices, not to alert me of hit stops.

I want to be out of any stock the moment my stop is hit. That's the whole point of having an automatic stoploss order with a broker. If you wait till you get home, your stock may well be 10-15 or 20% down by that time. Especially if you trade the specs, you want to be taking immediate action. If you don't watch the market intraday, get your broker to do it for you. That's what the bastards are for!

cutz · 9 November 2009

nunthewiser said:
LOL . I use SMS alerts constantly in between my bewty sleeps etc , handy way of waking me up when something of intrest to me is happening ........ I drink out of a mug

OK nun i take back what I said.

I guess its handy if you're up partying all night and in and out of sleep all day.

And BTW there's nothing wrong with sipping latte`s out of a mug.

shortlist · 10 November 2009

kam75 said:
When a stoploss is hit, the broker will route your order to the market. But, whether they will get you out and at what price is another story. Etrade with whom I traded for over 7 years routed my orders to the market, 'At Market', meaning I was exited at the stoploss price or the next possible price below. Not all brokers do this however so you gotta be extremely careful when chosing a broker. Take Bell Direct for example. If your stop is hit with them, they route the order to the market "At Limit", meaning, that if there aren't enough buyers at your stoploss price, you won't be exited out of the trade. If the stock does down the crapper then tough luck, you could be up for a big loss. So always make sure you question these brokers like a damn witness before deciding to trade with them.

Thanks kam75 - some really useful advice in here. I'll check Westpac's M.O. on this subject right away. I would have thought a trader would be give the right to at least choose - and anyway, what use is an at limit conditional order on an automatic stop loss? Thinking about it I can see the use of both systems - so the choice should be provided. In your examples are these the only method or simply a default position which you are allowed to change if you wish some stop losses to be sold at market and some at limit?

On a more general note, do you guys use stop losses on all trades without exception? I ask because in some of paper trading I have bought and sold positions in extremely short time frames (minutes). Mostly I take longer positions, but when you are watching a position so closely and entering and exiting it so quickly is a SL absolutely necessary?

Just looking for the voice of experience on this one.....

Simple question about stop losses

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