Question re Stop Loss Orders
 

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?

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

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.

Yes.

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.

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

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.

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.

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.

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.

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.

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.

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.

Golden rule of investing……buy and hold!

10% may be a little low you may look at 15%-20%. It really depends how much gain you have in them now. With a stop you want to capture some of your gain not just your principal. With 10% in todays market it may hit in the morning and bounce back up before the close.
Just be sure you are holding on to the gain you are wanting to keep.
Yes stops are a great idea

Holding can be good but make sure what you own is still a worthwhile investment. Nothing lasts forever.

I would not use stop loss orders across the board but I do use them occasionally for highly volatile stocks. Be sure to distinguish between a Stop Loss Limit and Stop Loss Market order. If you use a Stop Loss Limit the stock could fall below you limit price at the open and never execute.

Does anybody remember the “Flash Crash” on May 6, 2010?

There is a short article you can find on the Investopedia site that explains what happened. That was the biggest one — trillions — but there have been a couple of others, too.

I guess there are now measures in place to prevent it happening, but when computers make decisions, who knows. . .

When I first started investing online, without a broker, and would have a significant loss, I would print out a copy of what had happened, stick it in my desk drawer, and look back at it days or weeks later. I called it, “vaccinating myself” against emotional, quick reactions.

My Rule #1 is “Know What You Own” and Rule #2 is “Know Thyself.”

That is how I work it, so I have never used a stop loss.

Low Beta Boomer

Not exactly. For example, Vanguard has an S&P 500 Index mutual fund and also an S&P 500 ETF. Both investments are designed to mirror the S&P 500 index. They are not actively managed, but the manager of both needs to buy and sell stocks within the mutual fund or the ETF to match the index. Mutual funds can be actively managed or not. The same is true for ETFs.

Buy low and sell high.

A stop loss order seems to go against that strategy.

Too old to be taking Risks… if you didn’t make it by now, you missed the boat!

If you can't afford to lose the money, you shouldn't be buying highly volatile stocks in the first place.

How did the Stop Loss design/strategy work for the Titanic???

:ohdear:

Since 2008 the saying is buy high and sell higher.

You do not know what you are talking about.

The "F" in "ETF" stands for FUND. It's not "ETS".

Yes you can set a stop loss order on an ETF.

The problem for most is when to sell high. Many years ago promised my wife to buy her some fairly expensive jewelry if price of a stock doubled.

It did and we sold and the stock went up and up and up. The value of the jewelry did not.

Thanks for responses.

Actually, I do know what I am talking about. Let me see if i can break this down and explain it in bite size chunks much like I explain things to my 5 yo grandson.

The E in ETF mean EXCHANGE. The T in ETF means TRADED. Still with me? Ok, now you are correct the F in ETF means FUND. Score one for you - happy day! Ok, now, assuming you have got all that straight in your head, it’s called an EXCHANGE-TRADED FUND because .. wait did you see how I got those words in that order? Ok, it called that because because it is traded on an exchange just like a? I’ll wait .. A STOCK .. you got it, bingo! An ETF will trade on the exchange just like a STOCK even though it may have underlying equites (big word there, google is your friend on that) that make up it’s value.

So, there, you see, an ETF (refer to above if you have forgotten what that stands for) is just like a stock and trades like a stock.

Broken down for a five year old .. you still with me?

With a stop loss and the market volitility each day, it could easily spike down 10% during the day and would then cause a sale of your stock. If you want a stop loss, have it set on the closing price to avoid the interday spikes.

The point of the Stop Loss order is to prevent loss greater than you can accept
 

A stop loss order does what it says. It stops loss of value below a certain point that you determine. It does not allow you to participate in a rebound, which is uncertain. There is always volatility in the market. The Stop Loss order is intended to protect your asset from a potential loss greater than you are willing to accept. You can always buy the asset again if you are interested in potential market gains. Good luck!


QUOTE=44Apple;2076599]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?[/QUOTE]

Actually, you have to be careful with Stop Loss Orders. Let's say you buy a stock for $20, and set a normal stop loss at 10% or $ 18. Your sell order is then placed into the system as a market order once it crosses 18.. If the next trade is $ 17, then that's what you get. Different brokerages have somewhat different terminology for Stop Quote and Stop Quote Limit orders.. read up on that.

Also, when you set up tight stops, at least in the days before electronic trading, and certainly in thin market stops, specialists trading in your stock often did what was termed "clearing out the stops". In the case I referenced above, they might have a stock that was fairly stable at 18.25, but see that there were numerous "stop" orders at 18, 17.75 (days before decimals), and lower the next trade to 17.5 or so trigger the stops and then reset the price back to 18.25.. That was so they could simplify their book. I actualy had that happen to a preferred issue I had a stop on not too long ago..

I have a friend where we regularly discuss investments with. I did this and why kind of stuff. I regularly laugh at the thought we should set it up and let it ride the ups and downs. Warren Buffet labeled the greatest stock picker has stated he rarely beats the S&P 500. Warren Buffet has stated most of us should simply buy the index. Confession. I look every day, as does my friend. Over fifteen years, easy to access information, for a year I beat the S&P once or twice, So roughly 13x a simple average, which you/we can buy, beat me.

It does make me wonder who or what is moving what we call THE MARKET. I've never used a stop loss. Automatic, with me tends to get forgotten so I've lost control.
Wrong terms but I use a stop buy and a stop sell. I never buy or sell at market price.
When buying I place an offer to buy at $. The same with selling. In my IRA where short term tax is not an issue. You/we will pay short term tax on it even if held long term-RMDs. If, I get the stock at MY offered price, I often put in a good till cancelled sell order

The more I see, the more I realize HUH that can't be so. I have an account with Fidelity.
Commissions are now zero. As much as they LOVE me they cannot work for FREE.
I've had price improvement. You put in a bid of say 29.95 and it is filled at 29.945 of course not objection to paying less and I don't care but how is it decided that the seller should not get a price improvement to my bid of 29.95. For that matter I can only bid two decimal places. I've had orders filled at four decimal places.

The big guys, people like Buffet do not even play in the same market as we small guys, we who are bait for the sharks, do. You can watch trades, placed filled etc. Trades of 30,000 shares of xxx that Buffet buys you do not see. He likely calls places like Fidelity and says I will trade you xxxx shares of for xxxx shares of.

From 1965 through the end of 2021, Berkshire shares generated a compound annual return of 20.1% against 10.5% for the S&P 500.

never use them. Keep track of investments all day, every day. Missed too many breakouts with them. But, if you are not comfortable keeping an eye on things all day, they are a useful tool.

Many folks would rather not keep track all day, every day - they have full time jobs, or may not understand how to read charts, or not care about support and resistance.

An incredible track record.

The site i use has StopQuote and StopQuote Limit orders. A StopQuote is triggered when the last sale price hits your number and immediately turns the sale into a market order. In the case of a rapidly declining market your sale could be substantially lower than your StopQuote price. A StopQuote Limit order is also triggered when the last sale price hits your number. However, your order is converted into a limit order, meaning the sale is NOT executed until you get your limit price or better. In the case of a rapidly declining market if your limit price is not hit, you continue to own the stock albeit at a presumably much lower price. In either case, remember enter GTC (Good til Cancelled) in the timeframe slot, else the default is only good for the day. Most GTC's are good for six months.

Our current stock market and rate of inflation has made most feel uncomfortable.
I've never used a stop loss order. As I understand it, you can put in a stop loss order and if it drops to your less 10% it will be offered for sale. That does not mean you will get the less 10%. Your shares may actually be sold at lower than the less 10%.

Our stock market. I use the S&P as average. My brokerage account shows rate of return. Money? I question if it is REAL. If it is real, it cannot simply disappear.

My easy to see records go back 15 years. This is the first year that I have lost money in the market. On top of that there is INFLATION. Now approaching 10%.

Depending on whether you hold the etfs in an IRA where you are TAXED at your highest tax rate, no long term tax benefit, when you need to or are forced to withdraw the money at a certain age. Or in a taxable account, you can actually end up paying tax and have a loss.