“The major advantage of using protective stops is that, before a trade is initiated, you have a pretty good idea of where you will be getting out of the trade if it’s a loser. “
Stops can be dangerous. For example, you have a stop at 90 on a stock at 100. The next morning it opens on rumor at 50. Your stop sells it at 50. Moments later, rumor is debased and it returns to 90. You just lost big time.
The Flash Crash burned some people as well.
“Stops can be dangerous. For example, you have a stop at 90 on a stock at 100. The next morning it opens on rumor at 50. Your stop sells it at 50. Moments later, rumor is debased and it returns to 90. You just lost big time.”
Yes indeed. I am of the opinion that stops are low-hanging fruit for large fund managers and high-volume trading firms, a little bit of extra sugar sprinkled on top of mass-short manipulation.
A little bit of market fluctuation coupled with some strategic trading volume to goose the dip a bit further down, and all of a sudden you have automated stops coming up for sale at very nice prices.
Not just stops but any and all orders are manipulated and have been for at least 10 years by HFTrading algorithms to scalp you bigtime ...