Stoploss qns

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Would setting a fixed stoploss of 30 pips prevent a sudden jump in price of 100 pips against your order (meaning that within a tick, the price jumped to 100 pips)? Therefore closing it at a loss of 30 pips instead of 100 pips?

 

A quote that might help :

A Stop order is an instruction to submit a buy or sell market order if and when the user-specified stop trigger price is attained or penetrated. A Stop order is not guaranteed a specific execution price and may execute significantly away from its stop price.
NMSS_2:
Would setting a fixed stoploss of 30 pips prevent a sudden jump in price of 100 pips against your order (meaning that within a tick, the price jumped to 100 pips)? Therefore closing it at a loss of 30 pips instead of 100 pips?
 

thanks mladen! Looks like whether hard stops or soft stops, these dont stop runaway spike prices.

 

Yes, toy are right. Stop loss does no mean that it will be closed at that price at all. Maybe even better quote is this one :

A stop-on-quote order, if triggered, guarantees execution but not price.
NMSS_2:
thanks mladen! Looks like whether hard stops or soft stops, these dont stop runaway spike prices.
 

If gap happens you are for sure going to get the worst (worst for you of course) price for stop loss execution.

 

One more quite (and then no more spaming on this subject )

Stop Loss Order Pros and ConsLet's first examine the pros and cons of setting a "hard stop with a broker (full commission or discount). An established stop order with a broker means you do not have to monitor the action of your stock continuously. You can even go on vacation knowing that your stop is there to protect you. Another advantage is to determine the stop price when you are doing your stock homework. This removes the emotion when watching the stock fall and is especially true for those who want to keep their stop price to themselves and not "tell" the market the price they are willing to sell. Many people let a stock fall through their predetermined top price hoping it will go back up, so they do not initiate the sell. It then continues to fall and they incur a much larger loss. Entering a stop loss order when you are not emotionally focused on the price movement helps to maintain your trading discipline. Finally, you only pay for a stop loss order when the order executes, so there is no extra charge for the added piece of mind.

One disadvantage is the stop price could be activated by a short term drop in the price of your stock, before it resumes its upward move causing you to miss out on a nice profit. This can be caused by the normal short term fluctuation of the stock. Setting a stop that is within the short term trading range of a stock will most likely cause it to execute and cause you a loss.

Another disadvantage is when you enter a stop loss order, it is placed on the books of the market makers who make a market in that stock. It never ceases to amaze me that a stop will be hit, forming a short term low and then move up again. There is a belief among experienced traders that market makers move a stock down to the stop to get more shares for their account, since they believe the stock will rise again. Remember, they see all outstanding buy and sell orders, so they can judge the overall demand for the stock and, thus, whether the price will rise or continue to fall.

Something to keep in mind is that a stop loss order becomes a market order when it is triggered. As a result it will execute at the then prevailing price, which might not be at the price you set. Normally this is not a problem, however, if a stock is falling precipitously, then you might have your order completed at a much lower price. This is one form of slippage. You could enter a stop limit order rather than a stop order. The difference is that a stop limit order becomes a limit order when the predetermined price is hit. This helps you control the price of your sell order. However, it does not guarantee that the order will execute. If the stock's price never trades at the specified price it may continue to fall and you will still own the stock.

techmac:
If gap happens you are for sure going to get the worst (worst for you of course) price for stop loss execution.
 

As usual : no way a trader can get a better part of the deal

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