So I finally got margin set up and since I’ve bought a bunch on it, I decided to set up some trailing stop limits. Good call right? I thought so. Got even more excited as the stock price climbed and climbed today, a nice 1.X% gain in 24 hours ain’t half bad. Then some S.O.B. decides to fatfinger a sell order for about a 3% loss, last order reflects this lowball deal, kicks my limit and now I’m out 2% - yep, a nominal loss on what was an otherwise fantastic day. Fan-freaking-tastic.
Sorry, just had to get that off my chest. First margin holding, first trailing stop limit, and first full market day with said holding, just my luck that some freak occurance would cost me. I guess the perk is I now have a baby tax deduction.
Yeah, that comes with trading. Sometimes hard stops will protect you from catastrophe, sometimes they just get hit and then bounce back to frustrate the hell out of you. It sucks, but just take the loss and move on to the next trade.
Trailing stops are to enforce exit discipline (in a trading mindset) and to protect against disaster (in an investment mindset). No matter how you do trailing stops, you will get whipsawed from time to time. The key is to make sure that your position sizes are small enough that a whipsaw doesn’t cost you much. The goal is to avoid large drawdowns in total portfolio asset, which are much harder to recover from than a bunch of small ones.
In trading, you set your trading stops so that 1) day-to-day “normal” variations don’t stop you out, but 2) a major adverse move does. So you will generally use something like a multiple of recent volatility or average true range to set your stops.
If your stops have been hit, you can still re-enter the trade the next chance you get, if your investment/trading thesis is unchanged. Ideally, your stop getting hit is something that should force you to reconsider your thesis. You may reconsider and then decide it’s still a buy or a sell, but forcing that reconsider is important.
The real worry with stop-losses is something like a flash crash, where it blasts through your floor, so you sell way low, and then bounces back rapidly, so you have to buy at virtually the original price. Im surprised that more HFT programs dont’ try doing this, though I haven’t been following them carefully.
Yeah, in the end it isn’t a huge dollar value that I lost (reopened the position shortly after), it’s just incredibly frustrating to start off a holding with a loss right off the bat. It’s an index ETF so the idea is to hold it forever anyway - just being on margin my plan was to use stops in an attempt to avoid potential margin calls. I think the order that triggered the stop was for around 3.5% below the last, and my stop limit was for a 2% loss from the high. So all I actually lost was somewhere around 1 percent on a small portion of the portfolio. No big deal, just a big p*ss off and I needed to let it out.
Lock - Yup, definitely seems rich assuming they are a going concern but I really don’t know too much about the specifics of either. HLF does seem better positioned, in that I think this recent bit of news will have less impact than the negative info about NUS…but that’s probably just one of those L3 biases playing itself out since I’m in HLF and not NUS.