STOPS, end of day or intraday??

brucefleet

I trade large blocks of shares for clients. I always use stops. My question is, should stops be "live" in the system, thus the market makers can see them, or is it better to use manual stops? Given the large swings during the first hour of trading, it seems manual stops are better to avoid the sometimes massive swings. On the other hand, live stops prevent second guessing and maintain a firm discipline. I would love to hear thoughts from fellow traders.

markd

Do you really mean a block - over 5K to 10K shares - or do you mean a very large position but not large enough to trade off the floor? I'm assuming you mean the latter. I'm curious what usually happens when a very large position hits a stop. Does the whole thing go at one price, or does the order cascade down through the book until the block is liquidated?

brucefleet

10-30 thousand shares. The block sale usually is filled within one to two cents per share, when trading highly liquid securities.

thestockaholic

I have found that it depends on the time frame that you are trading and the volatility of the trade. For a long term position with low volatility, I use a live stop. But for shorter term trades with high volatility, I use alerts and keep my discipline.

brucefleet

That's exactly what I have been doing. The only problem is the discipline and second guessing thing!!

Cush

Bruce, the question of whether to use automated stops or manual stops is a question I have pondered for about 30 years now, and I have been on both side of the fence from time to time. In this past year, I have been stopped out (using automated stops) and missed some significant gains that occurred almost immediately after my stops were triggered. The same thing has occurred with my manual stops, though it seems when my manual stops are hit I am more likely to re-enter a position almost immediately if it was a dip in an otherwise uptrend . I console myself with the old saw about never losing money taking a profit, but sometimes it is aggravating. Either way, my stops are intraday. I see this as part of the broader question - when to sell?

As for the discipline and second guessing - oh yeah - me too! Second guessing - if the chart, as configured with my indicators showed it was time to exit, I am not as bothered as I am by lack of discipline.

brucefleet

Sounds like we are kindred spirits on this. So are you back to using automated stops?

Cush

Right now I am watching the market and using manual stops. With summer coming on, with periods when I will be away from the screen, I will likely place some automated stops. If the overall market turns down I am more likely to place automated stops. The more volatility in the individual stock, the less likely that I will use an automated stop for that particular holding. Are you using one or the other, or both in selected situations?

brucefleet

I use automated stops on what I hope to be longer term. My stop system is 2*ATR(8). When I trade leveraged ETF's I use automated stops due to the accelerated downside risk. I would like to use automated stops for everything but given my trade size 10-20 thousand shares on average, I'm afraid market makers sometimes will take me out. I wish there was an automated stop system that market makers could not see.