how do stop orders work?
Discussion
It depends. A stop order either becomes a market order or a limit order once the stop price is crossed. A sell stop order should be executed quickly but the market could move in milliseconds so there are no guarantees on what price you actually get.
What scenario are you trying to cover?
What scenario are you trying to cover?
CharlesElliott said:
It depends. A stop order either becomes a market order or a limit order once the stop price is crossed. A sell stop order should be executed quickly but the market could move in milliseconds so there are no guarantees on what price you actually get.
What scenario are you trying to cover?
selling iag tomorrow. will prob keep them for long term but wondered if stop orders would work in that scenarioWhat scenario are you trying to cover?
also intrigued as a lot of stocks have peaked rapidly in the last few weeks then gone down so wondered if you can just have it set to sell at a silly peak just in case
Pedro Raynard said:
Sounds as if the market price will have already moved lower and will open at a lower price. If the opening price is below the stop, then the boat has been missed.
I often wonder how market prices move when the market is closed... as the dawn rolls around the world I can understand how events ripple, but...petemurphy said:
500 Miles said:
Are you thinking airline stocks may crash following the Buffett news?
Yep! 
Simpo Two said:
I often wonder how market prices move when the market is closed... as the dawn rolls around the world I can understand how events ripple, but...
The market makers will reduce they make it live.To answer the OP do brokers still take stop orders? We stopped due to the liabilities involved if it was missed.
Simpo Two said:
Pedro Raynard said:
Sounds as if the market price will have already moved lower and will open at a lower price. If the opening price is below the stop, then the boat has been missed.
I often wonder how market prices move when the market is closed... as the dawn rolls around the world I can understand how events ripple, but...So, LSE stops pricing at 4.30pm but the value of the constituents carry on changing until 8am the following when pricing begins again.
petemurphy said:
how quickly do stop orders get executed? ie if you think a share will plummet the next day and it does, can you catch it at the beginning or do they take a while to process? conversely can you put them in in case a share temp spikes?
thanks
All a stop order is is a pending instruction to place a sell order when a price ticks through a specific level. thanks
You could set a stop at £1.20 on a stock that at the close on Friday closes at £1.60, if it reopens on Monday at 1p then that is where you will be filled if the size is available. The level you specify is irrelevant. It’s just the point at which your sell order is to be sent, where it then executes depends on what the price is for the size of your order. The two elements here are gapping and slippage. Gapping where the price never trades at your stop level but has a first print below it. This is typical overnight but also happens in hours especially as stocks become less liquid. Slippage is the difference between the best bid and offer quotes and where the price is for your size of trade if it is greater than the liquidity available at Best.
petemurphy said:
well the stop order worked although the share price didnt crash so who knows if it would have made a difference!
Must admit, after seeing your post and thinking about it I decided to put on some stop losses - then got distracted and forgot!I was surprised that they didn’t fall further! Would have been better not to take any loss though!
hello all just revisiting this.
i've put a stop limit order on sig tomorrow is case the news is bad and that has started me thinking why dont i use them more. eg odx shot up yesterday and then collapsed. should i of gradually put every increasing stop orders on as it went up? would they def be sold on the way down? just wondered if I should be using them more. or does the market try and set them off and then go up?
i've put a stop limit order on sig tomorrow is case the news is bad and that has started me thinking why dont i use them more. eg odx shot up yesterday and then collapsed. should i of gradually put every increasing stop orders on as it went up? would they def be sold on the way down? just wondered if I should be using them more. or does the market try and set them off and then go up?
petemurphy said:
hello all just revisiting this.
i've put a stop limit order on sig tomorrow is case the news is bad and that has started me thinking why dont i use them more. eg odx shot up yesterday and then collapsed. should i of gradually put every increasing stop orders on as it went up? would they def be sold on the way down? just wondered if I should be using them more. or does the market try and set them off and then go up?
One reason is that it may just be a quick dip or similar and it'll complete the second it reaches it which you wouldn't want if it was a dip. i've put a stop limit order on sig tomorrow is case the news is bad and that has started me thinking why dont i use them more. eg odx shot up yesterday and then collapsed. should i of gradually put every increasing stop orders on as it went up? would they def be sold on the way down? just wondered if I should be using them more. or does the market try and set them off and then go up?
Obviously if we're talking about a share that you bought at 20p and went up to £1 then putting a stop limit at 80p or something is fine but usually most Holdings are 20p buy and a 50% rise would be 30p so harder to work it out.
petemurphy said:
hello all just revisiting this.
i've put a stop limit order on sig tomorrow is case the news is bad and that has started me thinking why dont i use them more. eg odx shot up yesterday and then collapsed. should i of gradually put every increasing stop orders on as it went up? would they def be sold on the way down? just wondered if I should be using them more. or does the market try and set them off and then go up?
Trailing stops are extremely useful but only in liquid markets. i've put a stop limit order on sig tomorrow is case the news is bad and that has started me thinking why dont i use them more. eg odx shot up yesterday and then collapsed. should i of gradually put every increasing stop orders on as it went up? would they def be sold on the way down? just wondered if I should be using them more. or does the market try and set them off and then go up?
Your problem with something like ODX is that you can get absolutely nailed by the lack of liquidity. In fact those price spikes and slumps are usually a symptom of no liquidity.
What this means is that on illiquid stocks like small caps you can put a stop or trailing stop on your position but it’s only ever an instruction to dump your holding when a number is hit. It doesn’t ever take into account whether the amount of stock you are then selling is larger or smaller than the amount of stock available at best or whether there is any stock at all available away from best.
So you can have a stop triggered at 70p but the next buyer only exists at that moment in time at 50p.
The only way to hedge small caps is through only holding tiny position sizes compared to your normal blue chip exposure. They are nasty, illiquid markets. And obviously, when punting small caps the broker and mechanism you use is essential. Luckily most spank shops haven’t the balance sheet to be able to offer small cap equities.
I’d hazard that with OFX there was no volume involved in the spike and pull back so smacking the market during such a pullback with a real sell order would get you rinsed.
rsbmw said:
Volume was significantly up yesterday, over 5 times higher than average over the past couple of weeks. The only day it has been higher was its initial climb from 30p to 60p
The thing is that looking at daily volumes doesn’t tell you how much liquidity there was at best at point or trade. In reality they aren’t all that related. When you ping an order in, all that matters at that exact moment is the amount of demand at that two way bid/offer. If it’s less than your size then you’re going to get slipped on any fill. For example, you could spike daily volumes just with a pension fund fill that’s getting reported at a fixed moment or a bunch of leveraged retail positions getting closed out etc.
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