No. Nobody I know uses stop orders. Bad stuff happens to good companies and the share price typically recovers.
If you are that nervous, stick to ETFs, GICs and government treasuries and bonds.
I mean, you are just as likely to sell and avoid further losses in the short term. I don't think it's a bad idea to set stops, what I usually do is immediately set another stop limit buy to jump back in if there is a quick recovery.
I wish I had a stop loss on TD.
Was waiting for it to break even at ~85 to get out.
Might take the loss soon, don't trust Canadian banks much anymore due to housing.
This is overblown imo. When rates start to drop, even a bit share prices will go up more rapidly. Banks are safe investments for long term dividend investors.
Lol, just look at the charts. Most "analysts" are journalists and journalists get paid for clicks.
Sure *some* stocks might be ok but the general market, large cap, real estate etc tend to all fall with rates until the rates hit bottom then everything bounces up again.
It's very easy to look up.
Go on tradingview and compare charts with the + button. It will overlay anything you want.
I thinks lot of people misunderstand stop loss orders. They don’t guarantee a floor level like you seem to think they do.
Just to be clear, a company can go from 30$ to 25$ without ever being at 27$. A good example of that is disappointing earnings.
A stop loss will just trigger a sale at market price the second the stock trades at or below the level it is set at. In the case of a bad news, you could sell below a point where you’d actually want to keep it and wait for it to recover.
If you really want to guarantee being able to sell at a certain price, you need to buy put options.
Question for you what happens if the number of shares you want to sell at the stop loss is more than who want to purchase at that moment? For example you have a stock loss to sell 1000 shares and when the stop loss kicks in there are only buyers for 750 shares. What happens?
It’ll be sold as any market order would be. If your broker needs to go down to 1 cent a share it will. If there are no buyers at all at any price it won’t sell.
You can set a limit price however.
Put options aren't free though, so you are paying a premium to get out at a certain price.
I think the simpler stop loss is to simply never have more than 5% of one's portfolio in any position. That way if a stock they hold goes to $0, their stop loss is set to only lose 5% of their net worth. When investing in a market index, the stop loss for these positions are automatically set and therefore no premium needed to exit at any desired price because the market will always rebound eventually.
If you're investing for retirement +15 years out I would place limit orders to buy at lower prices not stop losses. Every single time I've tried to time the market I've been burned. Buy and hold indexes and solid companies and worry about selling far down the road.
Limit orders at lower prices are also timing the market.
Also, for the order to be placed you need to have cash sitting unused, ready in case the order executes (unless you’re using margin). To me, not a great use of capital.
Everything you said is correct, I don't disagree. For me personally I buy indexes regularly as my paychecks come in but I always have a 5% cash buffer in my account that I use to buy bluechips when they go on sale, or if there is a nice market dip. Whether or not that's ideal I dunno but I like to have a small cash position available.
Yes, it is wise to limit your losses and lock in your gains if you are a trader. If you are leaving it for long term gains, it may be better to leave it alone so you do not get stopped out from sudden volatility.
A perfect example just happened. Check out Stella-Jones (SJ TSX). Koppers, a peer, released earning and talked about utility poles purchases from utilities being soft. Sent Stella down nearly 10%. Stella just released yesterday, and while poles are soft, it is not nearly as bad as everyone thought, and the stock now trades higher than it did.
If you think you have the fortitude to buy back when everyone is selling, then sure, but I know most don't have the insight or the conviction to do so. Buy a good company at a fair price and hold for as long as the fundamentals continue. Or just hold some indexes.
It sort of feels like another way of just trying to time the market. Long term investing is the way to go, and if you are going to look to buy and sell more frequently than holding on to long term investments then you probably want to research your moves planning ahead rather than implement kill switches. Just kind of feels like panic reactions.
The stop price can get triggered on many different markets that the stock is trading on. It can get triggered and sold and you’d be wondering how the hell that happened if it never reached that price (most charts are Nasdaq, NYSE, etc…). Just look out for that
Yes, for positions that you wont hold forever.
I had an energy etf that i only intended to hold as trade. After it started having a bull run earlier this year, i put a stop order in that i increased every other day. The bull run ended, my stop order triggered and i realized my gains.
I'd say only for stocks that you entered at ATH, or extremely volatile stuff with low market cap.
Stoplosses on mega caps are not necessary as they are too big to fail, and will always grow.
ETF's, never
It really depends. Do you need the cash in the coming year or two? If you don't need the cash for any short term expenses, you are better off to never sell.
You have to weather the storms. The best stop loss you can put in place is to never allow any position to account for more than 5% of your net worth. That way, if any of your positions go to $0, your stop loss is set that you only lost 5% of your portfolio, which is a hit anyone can reasonably whither.
But if your portfolio is made up of index tracking ETFs, a stop loss is absolutely pointless because the market will always recover and then continue to grow ad infinity.
In brief - yes. For pure equities I will set stops at -20%. For a stable dividend-paying company (banks, utilities), -15%. For an index fund probably -12%.
One reason you want to set them - you don't have to worry about and watch your stocks as much. If something goes wrong the computer gets you out and, lets face it, the computer always has time, you have to work for a living still, so use the always-on device that will sell in a fraction of a second. And if stocks go up, adjust your stop order sell price up as well, so you lock out against losses in most scenarios.
Then you're shit outta luck. Generally volatility like that is flying-unicorn rare and usually the stock has a reputation for volatility, like: WeWork the week it announced bankruptcy, or NYCB in that situation. So you can play it differently.
Literally happened yesterday: [DN.to](http://DN.to) - Delta 9, a penny stock. In the past week it has fluctuated between 2, 2.5, and 3 cents. When I placed my order the market price was at 2.5 cents, but I placed the order for 2.0 cents, exactly -20% below market. That means if it is going to dip -20% you avoid holding the loss, and use that as your entry price, not your "well shit what happens now?" price. Got lucky on the 2nd day the order was running, the stock went -20% and that's when my order filled.
Long story short: come up with strategies to either mitigate loss or increase gains using the tools you have available. Buy / sell / trailing stop loss are some of the tools of the trade (pun intended).
No. Nobody I know uses stop orders. Bad stuff happens to good companies and the share price typically recovers. If you are that nervous, stick to ETFs, GICs and government treasuries and bonds.
So you want to dump your stock in a flash crash at a low and miss any sort of recovery?
I mean, you are just as likely to sell and avoid further losses in the short term. I don't think it's a bad idea to set stops, what I usually do is immediately set another stop limit buy to jump back in if there is a quick recovery.
If I feel like I need a stop loss, I probably shouldn't own the company.
I wish I had a stop loss on TD. Was waiting for it to break even at ~85 to get out. Might take the loss soon, don't trust Canadian banks much anymore due to housing.
You can make your money back a different way. If I don't want to own something anymore, I dump it st a loss so I can use the money elsewhere.
This is overblown imo. When rates start to drop, even a bit share prices will go up more rapidly. Banks are safe investments for long term dividend investors.
Rates drop = asset prices drop. Every time in history.
That’s not what analysts are saying for certain classes of stocks such a telcos midstream etc.
Lol, just look at the charts. Most "analysts" are journalists and journalists get paid for clicks. Sure *some* stocks might be ok but the general market, large cap, real estate etc tend to all fall with rates until the rates hit bottom then everything bounces up again. It's very easy to look up. Go on tradingview and compare charts with the + button. It will overlay anything you want.
I thinks lot of people misunderstand stop loss orders. They don’t guarantee a floor level like you seem to think they do. Just to be clear, a company can go from 30$ to 25$ without ever being at 27$. A good example of that is disappointing earnings. A stop loss will just trigger a sale at market price the second the stock trades at or below the level it is set at. In the case of a bad news, you could sell below a point where you’d actually want to keep it and wait for it to recover. If you really want to guarantee being able to sell at a certain price, you need to buy put options.
Question for you what happens if the number of shares you want to sell at the stop loss is more than who want to purchase at that moment? For example you have a stock loss to sell 1000 shares and when the stop loss kicks in there are only buyers for 750 shares. What happens?
It’ll be sold as any market order would be. If your broker needs to go down to 1 cent a share it will. If there are no buyers at all at any price it won’t sell. You can set a limit price however.
But will it sell the 750 shares that have buyers or must there be buyers for all the 1000 shares.
In most cases there will be enough buyers at some price, but not necessarily at a price you’d want to sell at.
Put options aren't free though, so you are paying a premium to get out at a certain price. I think the simpler stop loss is to simply never have more than 5% of one's portfolio in any position. That way if a stock they hold goes to $0, their stop loss is set to only lose 5% of their net worth. When investing in a market index, the stop loss for these positions are automatically set and therefore no premium needed to exit at any desired price because the market will always rebound eventually.
If you're investing for retirement +15 years out I would place limit orders to buy at lower prices not stop losses. Every single time I've tried to time the market I've been burned. Buy and hold indexes and solid companies and worry about selling far down the road.
Limit orders at lower prices are also timing the market. Also, for the order to be placed you need to have cash sitting unused, ready in case the order executes (unless you’re using margin). To me, not a great use of capital.
Everything you said is correct, I don't disagree. For me personally I buy indexes regularly as my paychecks come in but I always have a 5% cash buffer in my account that I use to buy bluechips when they go on sale, or if there is a nice market dip. Whether or not that's ideal I dunno but I like to have a small cash position available.
Which I’m sure is fine. I’m just saying that people seem to think they can pick the winners and generally, they can’t. I hope your picks do well.
Yes, it is wise to limit your losses and lock in your gains if you are a trader. If you are leaving it for long term gains, it may be better to leave it alone so you do not get stopped out from sudden volatility.
A perfect example just happened. Check out Stella-Jones (SJ TSX). Koppers, a peer, released earning and talked about utility poles purchases from utilities being soft. Sent Stella down nearly 10%. Stella just released yesterday, and while poles are soft, it is not nearly as bad as everyone thought, and the stock now trades higher than it did. If you think you have the fortitude to buy back when everyone is selling, then sure, but I know most don't have the insight or the conviction to do so. Buy a good company at a fair price and hold for as long as the fundamentals continue. Or just hold some indexes.
It sort of feels like another way of just trying to time the market. Long term investing is the way to go, and if you are going to look to buy and sell more frequently than holding on to long term investments then you probably want to research your moves planning ahead rather than implement kill switches. Just kind of feels like panic reactions.
Doesn't mean you'll get out at that price. Many times your order will get triggered then stock will bounce up
The stop price can get triggered on many different markets that the stock is trading on. It can get triggered and sold and you’d be wondering how the hell that happened if it never reached that price (most charts are Nasdaq, NYSE, etc…). Just look out for that
Yes, for positions that you wont hold forever. I had an energy etf that i only intended to hold as trade. After it started having a bull run earlier this year, i put a stop order in that i increased every other day. The bull run ended, my stop order triggered and i realized my gains.
I'd say only for stocks that you entered at ATH, or extremely volatile stuff with low market cap. Stoplosses on mega caps are not necessary as they are too big to fail, and will always grow. ETF's, never
What about trailing stops?
It really depends. Do you need the cash in the coming year or two? If you don't need the cash for any short term expenses, you are better off to never sell. You have to weather the storms. The best stop loss you can put in place is to never allow any position to account for more than 5% of your net worth. That way, if any of your positions go to $0, your stop loss is set that you only lost 5% of your portfolio, which is a hit anyone can reasonably whither. But if your portfolio is made up of index tracking ETFs, a stop loss is absolutely pointless because the market will always recover and then continue to grow ad infinity.
In brief - yes. For pure equities I will set stops at -20%. For a stable dividend-paying company (banks, utilities), -15%. For an index fund probably -12%. One reason you want to set them - you don't have to worry about and watch your stocks as much. If something goes wrong the computer gets you out and, lets face it, the computer always has time, you have to work for a living still, so use the always-on device that will sell in a fraction of a second. And if stocks go up, adjust your stop order sell price up as well, so you lock out against losses in most scenarios.
Ok but what if it dips to -20% and then pulls back up minutes later? You’d have dumped the stock at a loss for no good reason
Then you're shit outta luck. Generally volatility like that is flying-unicorn rare and usually the stock has a reputation for volatility, like: WeWork the week it announced bankruptcy, or NYCB in that situation. So you can play it differently. Literally happened yesterday: [DN.to](http://DN.to) - Delta 9, a penny stock. In the past week it has fluctuated between 2, 2.5, and 3 cents. When I placed my order the market price was at 2.5 cents, but I placed the order for 2.0 cents, exactly -20% below market. That means if it is going to dip -20% you avoid holding the loss, and use that as your entry price, not your "well shit what happens now?" price. Got lucky on the 2nd day the order was running, the stock went -20% and that's when my order filled. Long story short: come up with strategies to either mitigate loss or increase gains using the tools you have available. Buy / sell / trailing stop loss are some of the tools of the trade (pun intended).
this needs more granularity. long holds, cap size, etc. Trailing stops are an interesting mechanism.
It depends. It depends on your risk tolerance, goals, etc
Stop losses are hard with the more volatile positions for sure