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Actually limit orders are a perfect way for HF Traders to fleece regular investors...for instance if you set a stop loss at a certain level and a HFT causes the
by Edmond 13y ago
Actually limit orders are a perfect way for HF Traders to fleece regular investors...for instance if you set a stop loss at a certain level and a HFT causes the price of a stock to drop precipitously, you'll end up selling likely at a loss for an artificial reason.
This scenario used to play out a lot during the 2008 financial crisis. I remember loosing money because of such tricks.
- patio11 13y agoIf you do not intend to sell a stock for $40 then it is, in general, not advisable to tell your broker "Sell this stock at $40."
- Edmond 13y agoNot sure what you mean, but you do a stop loss to make sure you don't lose your shirt when a stock moves against you. No one intends to sell at a loss but that is part of the game. The problem is when market manipulators artificially cause the price to move against you thus triggering your stop loss.
- yummyfajitas 13y agoIf you don't want to sell your stock at a price below $X (for any value of $X), you should not tell your broker to sell below $X. If you want a mechanism to retain upside while limiting downside, it exists. It's a call option, not a stop loss order. If you don't understand the difference you should not trade. If you could explain the specific mechanics of what you believe is "market manipulation", it would be very helpful.
- hueving 13y agoA stop loss is not a limit order, at least in finance terms.
- Edmond 13y agoI am using that to mean the various order rules for capping trading losses/gains...I know the finance jargon meaning is slightly different.