Stop loss

[Shwty]

When a stop loss is placed, is this just for the broker or does it go in the order book? ie Can placing a stop loss ever influence the trend?

 

[FetteredChinos]

hmm, not the "trend" per se... but there are a few people on this board who believe that the SB companies have a look at their order book to see where the stops are, then spike the price through these levels to take as many out as possible and then continue in the original trend direction.

only speculation mind you, as i dont fancy a lawsuit...

(edit - forgot to say, this only applies to SB prices.. futures prices dont give 7 zlotys as to what the SB's do)

 

[TheBramble]

FC - I don't know that this (hypothetical) practise is limited just to SB firms.

 

[FetteredChinos]

so hypothetically speaking (lol) you think the MM's do the same job too??

who'd have thought it lol


FC

 

[Skimbleshanks]

Retail traders have a habit of putting their stops in the same place - one tick below the previous low, for example. Therefore it doesn't take rocket science to work out where the stops will be. So when the MMs, big boys, whoever, want to gun the stops, it's easy peasy and works every time.

 

[TWI]

In the floor traded markets this is common practice and with major technical levels in any market you will always get people hunting for the stops. When I used to trade US Commodity Futures in size I would never give large stop orders to a single broker.
They are all out to get you no matter what they tell you.

 

[Shwty]

Thanks for all that info. So I guess stop losses aren't quite the safety net I thought they were. I suppose I need to keep my fingers crossed until there is a significant profit before I can risk putting a safety net say half that profit margin below the support?

 

[darrenf]

If your stops are not at obvious levels, they will have much less chance of being hit, whatever market or instrument you choose to trade. ie instead of putting your stop 1 point below the last low or 1 point below a major support level, where loads of others have stops, put it a bit further away.

 

[Dow Dog]

Best to use mental stops if you can stay at your screen, provided of course that you have the discipline to hit the button when you arrive at your stop level.

 

[BBB]

Lets not forget the Jobbers - brokers who also trade their own account.

Not only will they trade against you, but swap orders around in fast markets with their mates. It appears as a few ticks slippage to the customer, or a bad fill once a month, but in fact it's outright theft.

(thus the reason not giving brokers your stop order)

 

[TWI]

Just don't be too obvious. Don't put the stop right below a support or above a resis as you will get whipped. Give yourself a margin. These days I always put a stop in when I take a position trade but I keep it quite wide. Just a safety incase of something really horrible.
Depends also what size you trade and whether it is a stop based on technical levels or money management. I wouldn't get too paranoid about it. knowing where to put your stop after all is one of the great skills of trading.

 

[DaveGos]

If you ignore all of the obvious places i.e a few ticks above/below high/ low, S/R, Congestion, any price with a zero in it, previous days high/low it often doesn't leave that many safe places. Far better is to have a stop consistent with your Risk Reward and Money Management strategy.

 

[Shwty]

What concerns me is that there appears to be nothing preventing the price from diving to take a wide margin stop loss too. I guess what I'm saying is, what makes the MMs keep the spread narrow instead of just buying everything.

 

[DaveGos]

They are regulated and can't make it to obvious I guess.

 

[TheBramble]

The MMs don't care per se about stopping you out - they just want order flow.

 

[Shwty]

Thankyou all very much. Things are a little clearer now.