[44Apple]

Do you tend to use stop loss orders?

I'm thinking of listing one for each of my etfs at the 10% loss point.

Seems like a holding could drop 10%, be automatically sold and then rebound the next day/week by a quick 8% or so and then I would be missing the rebound.

Thoughts?

[Babubhat]

Depends how much you monitor the market. You can set price alerts which can let you reevaluate when triggered

[Stu from NYC]

Can you even do this with an ETF? Thought it had to be an actual stock.

[RVJim]

Originally Posted by Stu from NYC

Can you even do this with an ETF? Thought it had to be an actual stock.

An ETF is an individual stock. Stop Loss orders are a good way to take a loss on a spike down and then miss the rebound. Better thing to do is to put together a well balanced portfolio and ride out the daily ups and down with an eye to long term performance. Unless you are a trader, you should just set your portfolio up and forget about it on a daily basis. If you are a trader, skip the stop loss and spend every day watching the market ticks.

[44Apple]

Originally Posted by Stu from NYC

Can you even do this with an ETF? Thought it had to be an actual stock.

Yes.

[44Apple]

Eventually, we are going to get hit with another major one day decline, bigger than what we've been seeing. Like '87. Just wondering if I should go this route for protection. Thanks.

[Stu from NYC]

Originally Posted by RVJim

An ETF is an individual stock. Stop Loss orders are a good way to take a loss on a spike down and then miss the rebound. Better thing to do is to put together a well balanced portfolio and ride out the daily ups and down with an eye to long term performance. Unless you are a trader, you should just set your portfolio up and forget about it on a daily basis. If you are a trader, skip the stop loss and spend every day watching the market ticks.

Wait a minute thought it was a mutual fund managed by funds such as Fidelity or Vanguard

[olliedog1950]

I do not use stop loss orders. If you are worried about a drop at least use multiple stop loss orders, say at drops of 5%, 7%, 9%, 11% and 13%. Timing the market is difficult. It would be better to sell after the market goes up 10%, lock in the profit and buy back after it drops back down. Much easier said than done, good luck!

[Stu from NYC]

Originally Posted by olliedog1950

I do not use stop loss orders. If you are worried about a drop at least use multiple stop loss orders, say at drops of 5%, 7%, 9%, 11% and 13%. Timing the market is difficult. It would be better to sell after the market goes up 10%, lock in the profit and buy back after it drops back down. Much easier said than done, good luck!

The problem with this approach is the stock goes up 10% you sell and the stock continues to rise and rise and rise.

Been there done that never again.

[RVJim]

Originally Posted by Stu from NYC

Wait a minute thought it was a mutual fund managed by funds such as Fidelity or Vanguard

No mutual funds and ETF are completely different animals. Mutual funds price once a day @ market close and any buy/sell orders are executed at that price for the day. ETF’s price and trade all thru the day just like an other stock/equity name and therefore behave just like a stock as far as buy/sell/stop loss etc.

Case in point on stop losses, if you had a stop loss in place in the past couple of months you would have possibly sold and then missed the relief rally that has followed. Many many tales of folks closing out positions at the nadir of the market (2008, 2020) and then missing the rebound. The second problem of selling on a loss is then you have cash to deploy but many folks are then afraid to get back in the market. As I said before, balance your portofolio, look at it on a reasonable schedule, keep a year of two of living expenses in cash and enjoy your life. If you are really worried about another 1987 or 2008 drawdown, put it under professional management and enjoy your life. If you like watching the market and actively trading then by all means trade. At this point in my life, time is more valuable than money so the market can do whatever it wants, I am going to enjoy my life while it does.

[npwalters]

I use them. It is a personal choice, of course, and depends alot on your risk tolerance. I typically use 20% on most and sometimes 30% on a very volatile stock.

[LuvtheVillages]

Originally Posted by Stu from NYC

Wait a minute thought it was a mutual fund managed by funds such as Fidelity or Vanguard

An ETF is a basket of stocks, often with some common feature. It is NOT managed. The basket of stocks remains the same through all the ups and downs. It is up to you to decide if this particular basket contains things you would like to own.

A mutual fund is a basket of stocks that IS actively managed. Some smart person (or computer) buys and sells different securities based on what he thinks will be most profitable. The mix can (and does) change frequently.

[LuvtheVillages]

Originally Posted by 44Apple

Do you tend to use stop loss orders?

I'm thinking of listing one for each of my etfs at the 10% loss point.

Seems like a holding could drop 10%, be automatically sold and then rebound the next day/week by a quick 8% or so and then I would be missing the rebound.

Thoughts?

Yes, that is exactly correct.

So I would not set a stop loss as small as 10%. I personally use 20%. Some people I know use 15%. But yes, you could lock in a loss and then miss the rebound.

And be sure to reset your stop loss higher as the stock goes up in price to maintain your 10%. That is called a trailing stock loss. You reset it higher as the stock goes up, but you do not ever reduce it.

I stopped using stops. Instead, I choose stocks that I feel have good long term prospects, are well managed, and their dividend is well funded by current operations. I buy them when the price looks good, and then hold on long term. But I still watch over them, about once or twice every 3 months.

Do not be concerned with daily ups and downs. If you are, and cannot tolerate a 10% dip, perhaps stocks are not for you.

[coralway]

missing potential bumps is exactly why I stopped using stop loss orders. As a day trader, I keep an eye on all my holdings all day every day. My key indicator is volume.

[rjm1cc]

Remember if the market fell 20% your order might be executed at that level.
Remember you may have a taxable capital gain.
The stock probably will rebound from the drop, just depends on if it is in minutes, days or months.
Yes I use limit order when they fit my needs. Usually to sell a stock that is increasing in value or to buy a stock I think will drop.