When Your Stop Loss Doesn't Execute

[EAS_Trader 10]

Since my original post, I have found that not all platforms have an acitivation rule you can set on a trade. Also I have chaged my trading strategy by using Options on a position. For day trading it is not pratical unless you really know the direction of your equity and you get in based on the overall direction of the market. I.E. you are going to trade RIMM, and its trading at 44.70 and you believe it is going to continue to fall, so I would get in on a 5 min chart, overall market is up, I would buy an 45 call option for 30 cents and set my stop loss at 45 with activiation rule. If I am wrong, I lose 30 cents but my option is making me money if Rimm reverses and goes up. If you hold it for longer than a day, and it gaps up you close one position with some loss, and let the other run.

[Kojak 10]

Also I have chaged my trading strategy by using Options on a position. .

 

So very interestingly, you have hit upon substituting a stop loss with a 'hedge'. Gives me ideas. Thanks.

 

Jose

[Tradewinds 12]

The broker I use has a platform that allows a stop to be triggered at one price, and executed at another price. That's actually the reason I switched to this broker. I changed my trading style, and don't use that option, but if I were doing long term value investing I would probably use that option all the time. There are separate settings for the trigger price and the sell price. It's more complicated, and more difficult to implement, and more time consuming to configure, and if it is a limit order, it still doesn't guarantee you a fill.

[Kojak 10]

Eztraderjr

 

I had a similar incident with IB about a year ago. I daytrade, but put in a stop in case of Internet problems. Stepped away and then came back to my trade to see that I had gone through my stop a few minutes previously but no trade executed.

 

A few posts earlier, 86834 points out what IMHO should be the obvious answer to your problem. Some stop losses should convert to market orders once the limit price is touched. Some trading systems do offer this facility.

 

Jose

[eztraderjr 10]

Eztraderjr

 

 

 

A few posts earlier, 86834 points out what IMHO should be the obvious answer to your problem. Some stop losses should convert to market orders once the limit price is touched. Some trading systems do offer this facility.

 

Jose

 

My stop was not a stop limit, but a stop market order. It did not reside on my computer, but was set with IB through their software. The stop price was hit, but the market order did not execute. Yes, if this was a stop limit and price went through the limit price quickly, then that would be a reason for the sell order to not execute; however, a market order should have executed and did not. IB blamed Lava and said they do not honor stop market orders that don't execute.

[SIUYA 11]

ez trader jr - what is lava?

[BlueHorseshoe 10]

You may be able to get a guaranteed order from your broker but he will protect himself by increasing the spread by his guarantee premium. You can ask the question of the broker.

TEAMTRADER

 

Hi TeamTrader,

 

I could be mistaken, but I think guaranteed stops are just a feature of spreadbetting for us here in the UK - they're certainly not an option for exchange traded derivatives like futures.

 

In fact, this is the reason why a spreadbetting company need to charge a premium; they're hedging themselves in an underlying market (usually futures), and there is no way for them to obtain a guaranteed stop therein.

 

Bluehorseshoe

[Obsidian 10]

My stop was not a stop limit, but a stop market order. It did not reside on my computer, but was set with IB through their software. The stop price was hit, but the market order did not execute. Yes, if this was a stop limit and price went through the limit price quickly, then that would be a reason for the sell order to not execute; however, a market order should have executed and did not. IB blamed Lava and said they do not honor stop market orders that don't execute.

 

if you believe you are right, dont hesitate to file a complaint and find another broker.

what is lava?

[onesmith 10]

Since this is the second time somoene's asked what lava is I will offer my opinion. IMO it's a typographical error.

[roztom 10]

As the previous example with the Hogs going limit and the stop being triggered and no trade so you are stuck.. Been there...done that... the Flash Crash is obvious so was 9/11, 1987 in S&P, the Hunt Brothers Silver Crash in 80 or 81 sellers only - no bids.. It went limit for several days, or a week or longer - you were screwed.. etc... I don't remember but it scared the #%&* out of me.. when I watched it first hand and saw the margin calls and the debits.. it was carnage..

 

IMHO the depth of market is very important yet you must be adequately capitalized since if you do this long enough it is only a matter of time before the probabilities catch up with you...

[eztraderjr 10]

Interesting that this is drawing some attention so many years later. The trade (or lack thereof) took place in December 2009. I took a screenshot and it captured my 3 monitors. I have cut 3 images from this to keep my user information and superfluous information out of the image.

 

Let me state again; this was a stop market order. There was plenty of depth. It was a mistake on the part of IB who passed the buck to Lava (and for those who think that was a typographic error, here is a link on IB's webpage with Lava information [url=http://http://www.interactivebrokers.com/en/trading/exchanges.php?exch=lava&showcategories=&ib_entity=llc]http://http://www.interactivebrokers.com/en/trading/exchanges.php?exch=lava&showcategories=&ib_entity=llc[/iB Lava page]).

 

As for the images, first I have an image of the active order. For those familiar with IB, you can tell it is active because it has a "C" there in case I want to cancel the order. Below that active order is a market sell order that was not transmitted. I usually had a stop market active order in case of system failure and also had a market sell order ready to transmit if I wanted to exit quickly. In this case, I had left for a couple of minutes and came back to find that the market price had already passed through my stop price. Since it was a stop market, even if there was not enough depth to execute immediately, you will see that the level 2 screen provided indicated that it should have filled.

 

 

 

The level 2 screen is from the same 3 monitor capture. I would like to point out that the data feed for this was not IB in case anyone wants to contest any of my claims here. I preferred the level 2 information provided by Ameritrade and had kept a small amount of money in that account so that I could use Quotetracker and obtain the full 17 days of intraday data (otherwise limited to 3 days of intraday data). Again, all 3 images are from one captured image and cropped to prevent some other data from showing.

 

The last image is just the chart of BAX at the time. I am not sure exactly when the price went through my stop level, but it was not a significant amount and I actually watched it for a couple of minutes to 1) take a screen capture to send to IB and 2) see if it would reverse again. In my mind, there was an error on the part of IB and I would be compensated for this mistake. If it reversed and went back above my stop market order, I would still report this to IB, but would not expect any compensation, just a chance to capitalize on their mistake. It unfortunately did not reverse and I canceled the stop order and closed with a market sell order.

 

I was not concerned with the amount of money that I lost. It was only $12. I was testing a new trading concept and had small quantities in place. These were daytrades as well, so I was only away from the computer for a few minutes and was already in a profitable trade.

 

In the end, IB did not reimburse me any money and said that their small print indemnified them from errors. They further said that to prevent risk of loss, I should monitor my trades. What? I had always thought that responsible traders put stop loss orders in to mitigate risk. Guess I was wrong. Had this been a large loss, I would have pursued further. The fact that it was only $12 made me pass on filing with any other entity. That account is no longer open, but I once again have another account with IB that I watch closely. So far, all of my stop losses have been executed properly

[Obsidian 10]

Since this is the second time somoene's asked what lava is I will offer my opinion. IMO it's a typographical error.

 

from now on I will blame lava if anything goes wrong :rofl:

[onesmith 10]

It will be more believable if you blamed lack of lava.

 

from now on I will blame lava if anything goes wrong :rofl:

[eztraderjr 10]

I made a mistake on the URL for Lava on the IB site. Here is the exact URL and I will try to correct this with a hyperlink below. http://www.interactivebrokers.com/en/trading/exchanges.php?exch=lava&showcategories=STK&ib_entity=llc

 

http://www.interactivebrokers.com/en/trading/exchanges.php?exch=lava&showcategories=STK&ib_entity=llc

 

Lava's direct site is simply Lavatrading.com

[Obsidian 10]

... It was only $12....

glad to hear that was a small amount

 

It will be more believable if you blamed lack of lava.

I am already doing that!