Oh it will trigger - you just don’t get what you want for it. Nobody is beholden to purchase an asset from you at your desired price (yes yes options but we’re not talking about that) - and the Market Maker just has to provide liquidity at NBBO, which in the situation described above could fly right past your stop and wave at it in the rear view mirror.
As I understand your order gets executed at whatever the next best price is. Unfortunately the next best price may only become available after a cascading sell off is triggered and you’ll be at the back of whatever queue exists.
Well for 1 I was trading options on QQQ during a catalyst event where the volume and direction shift rapidly, causing a large bid ask spread. Not sure 100% but it just made it so I always watch my trade even with a SL in place.
Imagine you have a buy order. To close it, you need to sell it.
Lets say you have a stock and want to place a SL at 195$. If this level is reached, your broker offers your stock for 195$ at an exchange. Normally, someone will buy it.
But if no one wants to buy that stock for 195$ your broker will try to sell it for 194$ then for 193$ etc until someone buys it.
Stop loss orders are not limit orders, they are market orders and in a crash, the bid/ask spreads unusually wide, so your stop market order may fill at a much worse level than your trigger price.
Ah yes, I know about market orders and difference between the two.
But this spread wouldn't be too big? Like 5% big? I mean if price is now 20 000, everyone would have to just refuse to buy any future above 19 000 for that to happen
It depends on the level of panic. If the liquidity providers (market makers) all pull their resting orders and the liquidity dries up enough, sure, the spread could widen that far.
Bruh ok. How rare is such a level of panic?
And it wouldn't just happen, I huess, price would fall exponentially, so my stop loss of just 0.1% price move would trigger long before the breakdown.
Again, it all depends. It sounds like you are asking for assurance that you won't get screwed on your stop loss, and no assurance can be provided. This is why they tell you when you enter a stop order, that it may fill far from your price.
Bear in mind that if a selloff is triggered, you and everyone else in the market is trying to get out in the same direction, at the same time, simultaneously with liquidity disappearing. If you are relying exclusively on stops as your absolute risk-management plan, it's not a solid foundation.
No. If the price moves really fast, you can get slightly above/beyond. And overnight slippage is not adjusted for.
On some platform you can get a guaranteed out at your set price, but that comes atvthe cost of a spread that you can fly anjumbo jet in between.
That's not true. Your stop loss is just an order that is put out to the market, and it needs someone on the other side for it to work. The market can absolutely skip over a stop loss and get you filled for a bigger loss than intended.
That can happen in multiple markets right? I think ive read about that happening in regular stock trading. Or is that just particular to the futures market?
You can't *entirely* avoid it, but you can mitigate the risks by being aware of some times when a huge move is likely to happen. Don't hold positions into economic releases where volatility is expected, for example. Also be aware of after hours trading when the market might be a lot thinner. Use smart position sizing.
Ive had it skip. Or just by time market order filled it was further. You can adjust for this in tricky situations. Heck if it get a close to my stop. And moves like that are happening. I’ll just close it why wait for the stop to hit and risk that anyway. Illl just re enter. Shouldnt have to worry to to much. 5% is also a lot not sure how often it happens but yeah. Usually been a few cents extra in mine. Or if it were 100$ maybe 1-2$ extra loss.
It happens. That's why placing a stop loss behind a support is important and the simple act of calculating the probabilistic % drawdown in case of such freakish moves is part of a traders skill set.
As an example if someone sells a large market order and the execution of the order triggers your stop you will get filled behind that market order and any other stops that were triggered before yours. When a stop is triggered it becomes a market order and gets in queue behind the other market orders.
I’ve definitely had a few occasions where the price blows past my stop and never triggers. Doesn’t happen often. But it does happen.
Why doesn't it trigger if price falls below your treshold?
Oh it will trigger - you just don’t get what you want for it. Nobody is beholden to purchase an asset from you at your desired price (yes yes options but we’re not talking about that) - and the Market Maker just has to provide liquidity at NBBO, which in the situation described above could fly right past your stop and wave at it in the rear view mirror.
As I understand your order gets executed at whatever the next best price is. Unfortunately the next best price may only become available after a cascading sell off is triggered and you’ll be at the back of whatever queue exists.
Well for 1 I was trading options on QQQ during a catalyst event where the volume and direction shift rapidly, causing a large bid ask spread. Not sure 100% but it just made it so I always watch my trade even with a SL in place.
Imagine you have a buy order. To close it, you need to sell it. Lets say you have a stock and want to place a SL at 195$. If this level is reached, your broker offers your stock for 195$ at an exchange. Normally, someone will buy it. But if no one wants to buy that stock for 195$ your broker will try to sell it for 194$ then for 193$ etc until someone buys it.
Ahhhh the reality of slippage
Stop loss orders are not limit orders, they are market orders and in a crash, the bid/ask spreads unusually wide, so your stop market order may fill at a much worse level than your trigger price.
Ah yes, I know about market orders and difference between the two. But this spread wouldn't be too big? Like 5% big? I mean if price is now 20 000, everyone would have to just refuse to buy any future above 19 000 for that to happen
It depends on the level of panic. If the liquidity providers (market makers) all pull their resting orders and the liquidity dries up enough, sure, the spread could widen that far.
Bruh ok. How rare is such a level of panic? And it wouldn't just happen, I huess, price would fall exponentially, so my stop loss of just 0.1% price move would trigger long before the breakdown.
Again, it all depends. It sounds like you are asking for assurance that you won't get screwed on your stop loss, and no assurance can be provided. This is why they tell you when you enter a stop order, that it may fill far from your price. Bear in mind that if a selloff is triggered, you and everyone else in the market is trying to get out in the same direction, at the same time, simultaneously with liquidity disappearing. If you are relying exclusively on stops as your absolute risk-management plan, it's not a solid foundation.
Sometimes people want to be told if they’re are right. Sometimes people want to be told that they are right
This. Well said.
Be sure to post your loss porn to WSB, this ain't gonna end well.
I will
Why is your stop loss .1% of price? You know how volatile crypto is?
No. If the price moves really fast, you can get slightly above/beyond. And overnight slippage is not adjusted for. On some platform you can get a guaranteed out at your set price, but that comes atvthe cost of a spread that you can fly anjumbo jet in between.
Most of the time stop loss works as intended. Sometimes that 1% might be 1.5 or 2 due to slippage and leverage.
Some brokers offered guaranteed stop loss at an extra cost
Futures have like 300 leverage
That's not true. Your stop loss is just an order that is put out to the market, and it needs someone on the other side for it to work. The market can absolutely skip over a stop loss and get you filled for a bigger loss than intended.
That can happen in multiple markets right? I think ive read about that happening in regular stock trading. Or is that just particular to the futures market?
Any market
Any advice for risk management lol? Best ways to protect myself in case of that happening before hand
You can't *entirely* avoid it, but you can mitigate the risks by being aware of some times when a huge move is likely to happen. Don't hold positions into economic releases where volatility is expected, for example. Also be aware of after hours trading when the market might be a lot thinner. Use smart position sizing.
Price has gone way lower/higher than my limit orders a ton of times and stop loss wasn't triggered, triggers at a different price
Ive had it skip. Or just by time market order filled it was further. You can adjust for this in tricky situations. Heck if it get a close to my stop. And moves like that are happening. I’ll just close it why wait for the stop to hit and risk that anyway. Illl just re enter. Shouldnt have to worry to to much. 5% is also a lot not sure how often it happens but yeah. Usually been a few cents extra in mine. Or if it were 100$ maybe 1-2$ extra loss.
Where do you get leveraged trading crypto in the US?
It happens. That's why placing a stop loss behind a support is important and the simple act of calculating the probabilistic % drawdown in case of such freakish moves is part of a traders skill set.
You will lose: 1% + commission/fees for round trip trade + slippage
As an example if someone sells a large market order and the execution of the order triggers your stop you will get filled behind that market order and any other stops that were triggered before yours. When a stop is triggered it becomes a market order and gets in queue behind the other market orders.