How dangerous is it to set stop loss 10% away?

New Member · Jan 8, 2015

On a stock that is between 200p and 300p. The stock is fairly rangebound and not really volatile (daily price change is usually no more than 2-3%) but am worried about the movements on the open. I hear of spikes on the open where stocks can momentarily open some way away from current price before coming back. How common are these opening spikes?

By the way, this is for spread bets.

itspossible · Jan 8, 2015

Can you not open an account and check on a demo .You have to be carefull with stocks mate and as you say they can gap down at the open and blow your stop.I was into some hi tech stock years ago and made a quick day trade profit.i was buying 1000 shares at say £5.The next day the share halved .i wasnt in it but i would have lost 2.5k.How much do you plan to invest in the stock?Also and i assume you know this if you stock is halted on the market or gaps through your stop due to a big move you may lose more than your 10%.Do you guarantee your stop.Personally i dont like stocks (unless shorting them)

tomorton · Jan 8, 2015

Be aware that some SB charts are showing mid-price, some show bid price - so the height of spikes caused by widening spread, which does happen at volatile periods like the Open, can be not obvious when you look back at intra-day charts.

All this is much more pronounced on smaller Cap stocks.

New Member · Jan 29, 2015

itspossible said:
Can you not open an account and check on a demo .You have to be carefull with stocks mate and as you say they can gap down at the open and blow your stop.I was into some hi tech stock years ago and made a quick day trade profit.i was buying 1000 shares at say £5.The next day the share halved .i wasnt in it but i would have lost 2.5k.How much do you plan to invest in the stock?Also and i assume you know this if you stock is halted on the market or gaps through your stop due to a big move you may lose more than your 10%.Do you guarantee your stop.Personally i dont like stocks (unless shorting them)

I find spread betting most comfortable as I have developed significant knowledge about it over the years and played the markets subconsciously throughout this time. I would have been very successful if I had the conviction to trade on my judgements. However, I am rather worried about stop losses being filled on the open. If what you say about gap downs at open is true, why would any day traders keep positions overnight?

My plan is to trade FTSE 100 and among group of 20 UK stocks that I have become quite familiar with regarding their price and charts. I have followed them quite closely over the last 3/4 years. I have also followed quite closely a few of the well known US stocks, like eBay, Goog, MSFT, Amzn and three or four others.

Let's say a sock is trading between 220p and 250p over a period of time and I go short at 245p, with a stop loss 10%, is it very likely there could be a spike of 10% on the open considering its not a volatile stock?

counter_violent · Jan 29, 2015

New Member said:
I find spread betting most comfortable as I have developed significant knowledge about it over the years and played the markets subconsciously throughout this time. I would have been very successful if I had the conviction to trade on my judgements. However, I am rather worried about stop losses being filled on the open. If what you say about gap downs at open is true, why would any day traders keep positions overnight?

My plan is to trade FTSE 100 and among group of 20 UK stocks that I have become quite familiar with regarding their price and charts. I have followed them quite closely over the last 3/4 years. I have also followed quite closely a few of the well known US stocks, like eBay, Goog, MSFT, Amzn and three or four others.

Let's say a sock is trading between 220p and 250p over a period of time and I go short at 245p, with a stop loss 10%, is it very likely there could be a spike of 10% on the open considering its not a volatile stock?

Then instead of thinking about stop loss being the solution to the problem....how about hedging orders outside your frame of reference....at least then you are covered against catastrophe, which is what I imagine you are trying to achieve

New Member · Jan 30, 2015

counter_violent said:
Then instead of thinking about stop loss being the solution to the problem....how about hedging orders outside your frame of reference....

Even though I feel comfortable with spread betting and heave learned quite a lot, I am still new to this overall and still trying to get to grasp with the various technical terms. When you say hedging an order, do you mean making a second bet in the opposite direction? Sorry if this comes across sounding stupid. I would appreciate you explaining this. Thanks

counter_violent · Jan 30, 2015

New Member said:
Even though I feel comfortable with spread betting and heave learned quite a lot, I am still new to this overall and still trying to get to grasp with the various technical terms. When you say hedging an order, do you mean making a second bet in the opposite direction? Sorry if this comes across sounding stupid. I would appreciate you explaining this. Thanks

Yes, so for example you might be long on your individual shares....but decide to go short the corresponding index, ie ftse, should any weakness show up that is outside your risk tolerance.

tar · Jan 30, 2015

counter_violent said:
Yes, so for example you might be long on your individual shares....but decide to go short the corresponding index, ie ftse, should any weakness show up that is outside your risk tolerance.

The problem here is individual shares have its own crucial news/announcements , which may not even effect the index at all ...

counter_violent · Jan 30, 2015

tar said:
The problem here is individual shares have its own crucial news/announcements , which may not even effect the index at all ...

Sure, just one example. I think the OP may need to read around the subject and find a method that suits.

How dangerous is it to set stop loss 10% away?

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