3 ms·

By definition, a 'wild swing' is a very short timeperiod event which typically doesn't affect prices too much on average. If I hold stock and it's down 50% on o

by growse 11y ago

By definition, a 'wild swing' is a very short timeperiod event which typically doesn't affect prices too much on average. If I hold stock and it's down 50% on one day and recovers on the next, I don't really care because I'm not trying to make money off market events. What I actually care about is the stock's performance over months/years. For most retail investors, market blips, and thus their access to low latency are irrelevent because they don't really alter the month/year picture.

jackgavigan 11y ago
> If I hold stock and it's down 50% on one day and recovers on the next, I don't really care... You do if you get stop-loss'd out of the position at an unrealistically low price.
- mistermann 11y ago
  Which happened to me Monday morning, although not down 50%, and I had just two days before put that stop in place because earlier in the year I had lost a ton of $ on two different stocks by not having one. I think people like me are easy pickings for HFT algorithms.
  - kasey_junk 11y ago
    So you put in a stop loss order and didn't want it to trigger when the share went down? Perhaps it's not the correct hedging tactic for your trade? Maybe you should have been using options? If you don't understand proper hedging for your trade, you aren't easy pickings for HFT algorithms, you are easy pickings for everyone in the market.
    - mistermann 11y ago
      My point is that stop loss orders, which exist because they are a prudent way to limit your losses, are highly susceptible to flash crashes, and depending on their actual implementation, possibly subject to exploitation. In retrospect, in this case I'd undoubtedly have been better served by options, but options are (or can be) complex, it is a whole new way to lose money. History has shown me that I shouldn't be trading individual securities!
      - fredkbloggs 11y ago
        Based on your statements, you shouldn't be trading anything. If you don't know how to use the tools of the trade, you are all but guaranteed to lose. Not every trader is an options trader, but every trader should understand the fundamentals of options. Trading is a specialized business all its own, no less so than dentistry, chemical engineering, or lobstering. If you haven't attained the required expertise, the results are going to be awful. Non-traders would all be much wealthier if their brokers took away their Sell buttons.
    - jackgavigan 11y ago
      I think that's unnecessarily harsh. If a retail investor had set a stop-loss on a stock like the RSP ETF [0] that got triggered at -50% because the price diverged hugely from the NAV, I think they have cause to feel hard done by.
- Anderkent 11y ago
  Simple solution: don't set up a stop loss. Accept that the best you personally can do is track the market, and if the market crashes so will your portfolio.
  - fredkbloggs 11y ago
    Stops aren't for investors, so "tracking the market" isn't relevant here. Investors get their returns primarily from dividends and possibly (based on luck) from buying low and selling high, on the rare occasions they sell. Traders get their returns primarily from buying low and selling high at a later time as well as other strategies such as various forms of arbitrage. Trading is itself a business, and as such a trader's returns do not track an index any more than a single arbitrary company's profits do. A trader will usually have many positions open, and successful traders have a plan for every position. Stops are one tool that a trader can use to execute that plan, usually to cut their losses on one of the many trades that they know will go against them. A loss on a particular position is not a disaster and every trade's plan accounts for the possibility of having to exit with a loss. This is much more important to traders than investors because traders make or lose money based on the behavior of the market; investors make or lose money based on the success or failure of the underlying businesses they own, so buying or selling an asset based on market behavior is not appropriate. Traders are well aware of the risks of using stops: information leakage (stop-hunters), exposure to bad data, and bouts of illiquidity. Some of those risks can be mitigated by using stop-limit orders instead of the normal stop-market type, but not all, and stop-limit orders carry the risk of accumulating additional losses without exiting. Everyone knows all of these things; there are no surprises. Weep not for the unfortunate trader. He knows it's just part of the business.
    - Anderkent 11y ago
      That was pretty much my point. If you don't have a particular advantage over other traders (i.e. at least that you're doing it full time, and not just after hours), stop trading and start investing.

by growse 11y ago

jackgavigan 11y ago

> If I hold stock and it's down 50% on one day and recovers on the next, I don't really care... You do if you get stop-loss'd out of the position at an unrealistically low price.

mistermann 11y ago
Which happened to me Monday morning, although not down 50%, and I had just two days before put that stop in place because earlier in the year I had lost a ton of $ on two different stocks by not having one. I think people like me are easy pickings for HFT algorithms.
- kasey_junk 11y ago
  So you put in a stop loss order and didn't want it to trigger when the share went down? Perhaps it's not the correct hedging tactic for your trade? Maybe you should have been using options? If you don't understand proper hedging for your trade, you aren't easy pickings for HFT algorithms, you are easy pickings for everyone in the market.
  - mistermann 11y ago
    My point is that stop loss orders, which exist because they are a prudent way to limit your losses, are highly susceptible to flash crashes, and depending on their actual implementation, possibly subject to exploitation. In retrospect, in this case I'd undoubtedly have been better served by options, but options are (or can be) complex, it is a whole new way to lose money. History has shown me that I shouldn't be trading individual securities!
    - fredkbloggs 11y ago
      Based on your statements, you shouldn't be trading anything. If you don't know how to use the tools of the trade, you are all but guaranteed to lose. Not every trader is an options trader, but every trader should understand the fundamentals of options. Trading is a specialized business all its own, no less so than dentistry, chemical engineering, or lobstering. If you haven't attained the required expertise, the results are going to be awful. Non-traders would all be much wealthier if their brokers took away their Sell buttons.
  - jackgavigan 11y ago
    I think that's unnecessarily harsh. If a retail investor had set a stop-loss on a stock like the RSP ETF [0] that got triggered at -50% because the price diverged hugely from the NAV, I think they have cause to feel hard done by.
Anderkent 11y ago
Simple solution: don't set up a stop loss. Accept that the best you personally can do is track the market, and if the market crashes so will your portfolio.
- fredkbloggs 11y ago
  Stops aren't for investors, so "tracking the market" isn't relevant here. Investors get their returns primarily from dividends and possibly (based on luck) from buying low and selling high, on the rare occasions they sell. Traders get their returns primarily from buying low and selling high at a later time as well as other strategies such as various forms of arbitrage. Trading is itself a business, and as such a trader's returns do not track an index any more than a single arbitrary company's profits do. A trader will usually have many positions open, and successful traders have a plan for every position. Stops are one tool that a trader can use to execute that plan, usually to cut their losses on one of the many trades that they know will go against them. A loss on a particular position is not a disaster and every trade's plan accounts for the possibility of having to exit with a loss. This is much more important to traders than investors because traders make or lose money based on the behavior of the market; investors make or lose money based on the success or failure of the underlying businesses they own, so buying or selling an asset based on market behavior is not appropriate. Traders are well aware of the risks of using stops: information leakage (stop-hunters), exposure to bad data, and bouts of illiquidity. Some of those risks can be mitigated by using stop-limit orders instead of the normal stop-market type, but not all, and stop-limit orders carry the risk of accumulating additional losses without exiting. Everyone knows all of these things; there are no surprises. Weep not for the unfortunate trader. He knows it's just part of the business.
  - Anderkent 11y ago
    That was pretty much my point. If you don't have a particular advantage over other traders (i.e. at least that you're doing it full time, and not just after hours), stop trading and start investing.