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Suppose I buy a stock at 1070.35. I have placed the stop loss for this trade at 1062.50. The next day, I see that the opening price of the stock is 1059.25.
My question is - does the stop loss get triggered automatically the next day, since the open price is 1059.25 and this open price is below my stop loss point @ 1062.50?
Can anyone shed some light into this situation? Thanks.
Can you help answer these questions from other members on NexusFi?
It depends on what sort of stop loss you have in place, being market or limit.
For the more typical StopMarket yes it will be triggered immediately (the final price of the sell order to get you out may even be different to that again, due to slippage).
For a StopLimit it won't be triggered until the price trades back up to a minimum of 1062.50 (which is a terrible thing for a proper stop loss which is designed to get you out). Which is why StopLimit(s) are generally used as Profit Target orders...
Hope that helps.
Cheers
Chris
P.S. on reflection there is a chance that for a SELL StopLimit order, one could only place that above the market not below... which is why its a profit taking order not really a stop loss.
Since many here trade futures....just a few pointers. If there is a big gap or abnormal price move in price, even if your stops were regular stops, it does not mean they will be honored. I have seen Stops that were turned into limits because of such moves. I believe that each stop has a "protection" limit and if this is exceeded than a limit will be in place.
For your reference: Order Types for Futures and Options - Electronic Platform Information Console - Confluence
I am sure the same thing applies to stock and I would encourage you to investigate.
Matt Z
Optimus Futures
There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.
The placement of contingent orders by you or broker, or trading advisor, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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