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Neurodoc's Blog : Beware the stop-buy order that doesn't!

Date

June 17, 2009

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This was a $2000 lesson for me: before trading opened yesterday I put in a stop-buy order (8.7) in Etrade and Zecco accounts for CKEC that hit my screen on Sun. Stock hit my screen but looked like it was going down. Official price range was 8.32-7.14 on >400,000 yesterday but my 8.7 stop buy was filled (!!) in both accounts at the open (high) for the day (6/16). I was told at Zecco (which quoted initially my purchase price at 8.7 last night but this AM was quoted as 8.26). I called Zecco and was told some market maker had some kind of sell order >9 placed until 9:30AM that somehow triggered the trade. I lost over 15% in a heart-beat and sold this AM.

Lesson (I suppose): don't place overnight stop-buy orders, especially on thinly traded stocks (which means I will almost never place trailing stop orders). I thought of requesting an SEC inquiry, but I doubt that will help. I hope this might save someone else their trading/investing $$! JW

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JoeJustJoe Date

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June 17, 2009 09:44 Abuse this post

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Your mistake was actually using a "buy stop" on a thinly traded stock. They can easily manipulate the bid/axed there. The even BIGGER mistake you made was placing a buy stop a full 10% above a level that the chart already gar-own-teed was going to get taken out with a lower low! :o Ifn you examine the chart using RSI you will see that the Mon 7.90ish low (put in before your buy order) was an RSI low which was gona get taken out even if the high got taken out foist. On top o'that, the chart said the high didn't even have to get taken out since it is a confirmt top! :o You made a dangerous bet and just be glad you got out with the loss you did...."hopefully" you didn't use a stop in getting out none neither. Stops are not for your ave Joe. If you are gonna use a stop it is gonna get hit...sell now "before" the stop gets hit. *-) A very simple rule for fokes who would consider using stops...yet nobody seems to follow that simple rule. :-) 3J

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Neurodoc

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June 18, 2009 01:30 Abuse this post

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Thanks for your input, 3J. Fully agree on point 1, not sure about the RSI analysis. I was looking for confirmation of what looked like a hammer at support at 8--it had hit my screen, so I thought a big upmove was possible, where the stop would have made sense. I called etrade--he couldn't figure it out and I'll talk with him tomorrow after further investigation. Turned out I was out at market at today's bottom before it moved up (of course). JW

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TickerBandit Date

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June 18, 2009 08:24 Abuse this post

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Neurodoc,

You should consider a platform to trade your account. One can program safeguards to ensure things like this do not happen. Your conditions are not known to market makers until your actions trigger.

3J, right about one thing. If reasonable market volatility (and particularly daily trend supported volatility) will stop one out, then one may as well sell now for a higher price. Stops are fine when they are triggered by trend reversal and that is what you were seeking --- long entry on reversal of down trend.

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rugosa1

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June 18, 2009 21:26 Abuse this post

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Ditto Neurodoc. All of my trailing stop orders have been triggered not long after I entered them and my positions closed only to see the stock reverse upward. A friend said this happened to him as well. Coincidences? Pete Najarian once said, "There are no coincidences on Wall Street."

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Neurodoc

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June 19, 2009 00:48 Abuse this post

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Thanks for additional info--TB--how do you create a platform--any brokerage firm?
Latest: Etrade investigated and it was determined to be an illegitimate trade so the trade was BUSTED and I got my money back! Zecco won't budge, so I will file a grievance with SEC.

Generally, rug, I don't do protective stops for that reason but have a mental stop loss and try to stick to it (8-10% drop from purchase price). Reversals still happen but that's life.

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TickerBandit Date

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June 19, 2009 07:08 Abuse this post

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Neurodoc,

I use StrategyDesk as a platform. I suspect there are some better but this fits all my needs and its a perk at Ameritrade which (I think) is free to everyone with an Ameritrade account. Its worth looking into. Aside from that, it would be cool contemplate formulation of entry/exit conditions with others here.

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TheWhiteDwarf Date

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June 20, 2009 13:01 Abuse this post

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I can relate! I have had a few stop orders that were mysteriously triggered, too -- though none resulted in the demoralizing plunge that you experienced. Also, it never occurred to me investigate or complain to the brokerage. I just wrote it off as one of the perils of playing the market.

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JoeCole

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June 22, 2009 02:05 Abuse this post

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I'm still waiting for FAZ to break $6 so I can hit another buy stop. There is nothing wrong with buy stop orders if you don't mind them getting hit. They should be based on the last trading price sooo, it often seems like the market is conspiring against you, I can assure you that it doesn't, but if you are still worried then consider using hidden stops which aren't entered until the conditions are met.

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