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Question About Stop Loss
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Created: by trucaKe4 Attachments:0

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Question About Stop Loss

  #1 (permalink)
Trading Apprentice
Portland, USA
 
Futures Experience: None
Platform: fxTrade
Favorite Futures: Forex
 
Posts: 2 since Aug 2016
Thanks: 1 given, 0 received

Question About Stop Loss

Hi all.

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.

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  #2 (permalink)
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  #3 (permalink)
Trading Apprentice
Sydney / Australia
 
Futures Experience: Intermediate
Platform: Custom
Broker/Data: Interactive Brokers, FXCM, IQFeed
Favorite Futures: ES, CL
 
Posts: 1 since Nov 2015
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trucaKe4 View Post
Hi all.

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.

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.


Last edited by cjdsellers; August 19th, 2016 at 10:50 PM. Reason: clarification
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  #4 (permalink)
Trading Apprentice
Portland, USA
 
Futures Experience: None
Platform: fxTrade
Favorite Futures: Forex
 
Posts: 2 since Aug 2016
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Thanks for the info cjdsellers

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  #5 (permalink)
Market Wizard
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Futures Experience: Advanced
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Broker/Data: Optimus Futures, LLC
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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.

PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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