Australian (ASX) Stock Market Forum

Trailing sell vs. falling sell

When triggered, the falling sell will place a limit sell order in the market at the price you select.
The disadvantage of a limit sell price is that price may gap below your selling price and your sell order won't be activated. Your losses can become much larger when this happens.

When triggered, the trailing sell will place a market order to sell immediately at the market price.
The disadvantage of the market sell is that there may not be enough volume at the market bid and the sell order will continue lower until your whole order is filled. If the bid depth is thin, this may cost you plenty if your sell order is large in comparison with the bid depth.

ts01.PNG . fs01.PNG
The pictures imply that the TS is used when your position is in profit and the TS protects some of the open profit, while the FS is to be used when your position is losing. Don't be confused by these implications the sell actions of a market order and a limit order are quite different.

We use the sell method that is suited to our trading style.
 
Hypothetical example:

Shares in BHP closed at $39.16 on Friday.

Suppose hypothetically that I own shares in BHP and that I set a Falling Sell order at $38.00

What will happen is absolutely nothing unless BHP shares trade at $38.00 or below, in which case it triggers the order I've set and actions a sell order for my shares.

So long as BHP shares don't trade at $38.00 or below however, nothing happens and I'll continue to hold them.

Note that the above is for example only. I just picked a very well known company and a price slightly below the present price to show how it works. This is not a recommendation to place an order at that price, example only. :2twocents
 
A stop order works in the opposite way to a normal buy or sell order.

So normally you'd say "sell only if the price cracks ABOVE this amount" whereas with a stop order you're saying "sell only if the price breaks BELOW this amount".

The idea being that if it busts below whatever amount you've set then you'd expect it to keep going and thus have sold before it drops any further.
 


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