Comments on: What is a Trailing Stop Loss Order?

By: carole

carole — Sat, 24 Oct 2009 21:10:03 +0000

Ameritrade has an Order Types Tutorial under their Education tab which offers good explanations and examples of the various types of orders.

By: 444

444 — Fri, 23 Oct 2009 00:00:02 +0000

I love trailing stop orders. Etrade offers them using percentages or dollar/cents amounts.

I have to continually remind myself not to fall in love with my stocks. I have to remember that my holdings are nothing put a pile of money. When the market is unkind to me, my stocks do not come over to rub my back and give me an Advil. They can and should be sold on a ruthless basis when prudent (I don’t always practice what I preach, but I’m working on it.)

By: Scott

Scott — Thu, 22 Oct 2009 12:17:58 +0000

Can you do this with lobster meals that are listed as “market price” on the menu?

By: Financial Samurai

Financial Samurai — Thu, 22 Oct 2009 06:24:49 +0000

Good stuff Jim. Whatever you do, never use market, unless you absolutely don’t care what price you’re going to get hit or lifted at.

By: Mark

Mark — Thu, 22 Oct 2009 02:17:48 +0000

Thinkorswim (now owned by TDAmeritrade)

By: Alan

Alan — Thu, 22 Oct 2009 01:53:37 +0000

Scottrade.com also allows you to do trailing stop orders.

So if I understand this right…Lets say i have 1k shares of stock XYZ @ $1 each. I set a trailing stop for 10%.

The stock rises to $2, then the limit would be at $1.80 if the price goes down below $1.80 it’d sell automatically?

By: Rick Morley

Rick Morley — Wed, 21 Oct 2009 20:24:05 +0000

I forgot. There is another common use for buy-stop orders. They protect against losses when you short a stock.

So if you short XYZ at $10, and (as in the blog post) want to limit your losses to 10%, set a buy-stop order at $11. So now when XYZ has their earnings report and rises up to $13, your maximum loss is $1.

By: Rick Morley

Rick Morley — Wed, 21 Oct 2009 20:19:49 +0000

People do this to profit off sudden upward movements. For example, let’s say that stock XYZ has been trading in a range of $8 – $10. The $10 mark is a resistance level. And the stock won’t really rise above that mark.

But let’s say that XYZ has an earnings report coming out. Their earnings report shows a much higher-than-expected profit. The stock will then likely rise above the previous resistance. Maybe it will rise to $13.

You would set a buy-stop order at (maybe) $10.25. So as soon as it tops the resistance level, it has gained some significant upwards momentum. So your buy-stop order triggers at 10.25 and you profit on the rise all the way up to $13.

By: Rick Morley

Rick Morley — Wed, 21 Oct 2009 20:14:46 +0000

Actually, I’m pretty sure most respectable brokerages do. My own brokerage, Zecco, lists both “Stop Limit” and “Trailing Stop” as options in the Order Type dropdown.

I’ll admit I never actually used them, since they don’t fit in my own trading strategy. Nevertheless, the options are there.

By: Bill

Bill — Wed, 21 Oct 2009 20:12:21 +0000

Etrade lets you place trailing stops based on fixed dollar amount or by percentage drop.

By: Jimmyj

Jimmyj — Wed, 21 Oct 2009 19:27:00 +0000

I don’t understand something. IRT the buy stop order. Why would you set it to be higher than the current market price. Wouldnt you want to set an order to buy lower than the current price? Am I reading that wrong or misunderstanding something?

By: eric

eric — Wed, 21 Oct 2009 19:16:14 +0000

I think I should buy some BRG….

By: Jim

Jim — Wed, 21 Oct 2009 18:56:02 +0000

That’s a good point, I haven’t been able to find one.

By: Mark Wolfinger

Mark Wolfinger — Wed, 21 Oct 2009 18:49:07 +0000

Jim:

Good description of an important concept.

By: neil

neil — Wed, 21 Oct 2009 18:34:35 +0000

Can you recommend any good online brokers that will allow you to use a trailing stop loss?