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The SEC may be looking at the elimination of stop-loss orders as one of several steps toward...

The SEC may be looking at the elimination of stop-loss orders as one of several steps toward preventing another flash crash, a Themis Trading white paper speculates. Stop-loss orders were not the precise cause of the flash crash, Themis says, but they resulted in "enormous damage" to many unsuspecting traditional investors.
Comments (22)
  • Silentz
    , contributor
    Comments (708) | Send Message
     
    WHAT??? Can they screw the individual investor some more please?
    24 Sep 2010, 01:53 PM Reply Like
  • Anthony Breen
    , contributor
    Comments (263) | Send Message
     
    YES.

     

    Keep stop-loss-limit.
    24 Sep 2010, 01:53 PM Reply Like
  • Silentz
    , contributor
    Comments (708) | Send Message
     
    Sure, because eliminating a tool that gives an investor a way prevent a significant loss is WAY better than addressing the HAL 9000 trading machines. You don't NEED a stop-loss if you're computer program is set to trade at a certain time. You just write the code for it to make a market trade at whatever parameter you want.
    24 Sep 2010, 01:56 PM Reply Like
  • Dalrymple Finance
    , contributor
    Comments (50) | Send Message
     
    Now, there's a good idea.

     

    Given all that's going on with flash trading and HFT, I hope you can hear the sarcasm.
    24 Sep 2010, 01:54 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3324) | Send Message
     
    So, only those wired to their computers can save their butts.
    24 Sep 2010, 01:55 PM Reply Like
  • Trader14
    , contributor
    Comments (224) | Send Message
     
    That would be a terrible idea, they can't be serious?
    24 Sep 2010, 01:56 PM Reply Like
  • Frank Choi
    , contributor
    Comments (115) | Send Message
     
    Only logical that the government focuses on the wrong thing when coming up with a solution.
    24 Sep 2010, 01:59 PM Reply Like
  • Stoploss
    , contributor
    Comments (1727) | Send Message
     
    LOL!! Full retard... Why not just go ahead and make selling stocks illegal. Isn't this what it's really all about??
    24 Sep 2010, 01:59 PM Reply Like
  • Gaping hole in the ocean
    , contributor
    Comments (207) | Send Message
     
    Buy and hold straight to zero
    24 Sep 2010, 02:03 PM Reply Like
  • Glocks-n-Gold
    , contributor
    Comments (189) | Send Message
     
    Yeah, no point in eliminating HFT, algos, bots....

     

    Stop-loss orders - those greedy individual investors/traders, it's all their fault!

     

    /sarcasm off
    24 Sep 2010, 02:03 PM Reply Like
  • davidingeorgia
    , contributor
    Comments (2713) | Send Message
     
    Well, of course...punish the people who got screwed the worst by the flash crash instead of finding and punishing the manipulators who caused it and took advantage of it.

     

    How utterly typical.
    24 Sep 2010, 02:05 PM Reply Like
  • Anjum
    , contributor
    Comments (77) | Send Message
     
    Its not the solution, I agree ... however, what is being sought to be addressed here is a sudden fall (flash crash) in the price ... which usually happens when a certain price level is breached due to stoploss orders that are bunched together in the same area.
    One can still place orders that are akin to stoploss ... just that it seems there will be no 'trigger price' and the order will be filled when the price comes, not otherwise. That would seem to avoid any cascading effect because of a trigger.
    24 Sep 2010, 02:10 PM Reply Like
  • nightfly
    , contributor
    Comments (1017) | Send Message
     
    Are you talking about stoplimit? Sure those work in a "normal" market. We ain't in one though...
    24 Sep 2010, 02:12 PM Reply Like
  • Anjum
    , contributor
    Comments (77) | Send Message
     
    Practically, I think both are same in terms of what they are designed to do. My point is, technical levels that are widely talked about and used by retail investors as trigger for buy/sell orders, has the potential of causing a cascading effect if algos, intentionally or otherwise, trigger it.
    24 Sep 2010, 02:21 PM Reply Like
  • rooftop
    , contributor
    Comments (140) | Send Message
     
    Let's just eliminate market orders while we're at it. MORONS. All of them.
    24 Sep 2010, 02:25 PM Reply Like
  • ain't no fortunate son
    , contributor
    Comments (1609) | Send Message
     
    Lots of little people get screwed every day by putting in sell stops anyway... way more so over the years than have ever been hurt by one day anomalies like the flash crash. MM's and specialists are notorious for "shaking the tree" - its one of the oldest scams in the book. They have a look at the order book and know that there is going to be big institutional buying interest after the open. So they short the crap out of the stock right out of the gate to set off cascading stop orders (all set by the little guy and too tight to the closing price), grab his shares cheap and then gun the stock back up and sell into the institutional demand. You can see a multi point drop right off the open sometimes for that very purpose. Its as old as the hills, its legalized robbery, and the SEC could give a damn about it... in fact, they probably consider it to be providing "liquidity" to the market, the freaking hypocrites. All the conventional street "wisdom" says set stops, but a lot of times the little guy misses a big move by being shaken out of his shares that way.

     

    And by the way, in a collapsing market like on May 6, just because you have a sell stop in doesn't mean you will be able to get filled at anywhere near the limit you set... many people don't understand that, but you could get filled a few points lower depending on where the bids are, and on May 6 there basically weren't any bids for 7 long minutes..
    24 Sep 2010, 02:31 PM Reply Like
  • radicall
    , contributor
    Comments (534) | Send Message
     
    Noble though, bad idea.

     

    I think investor education and awareness is more important. Having said that - the limit up/down helps reduce unintended volatility.

     

    You can emulate the same behavior as stop loss through other tools, like what AMTD offers is "Trade triggers". The order isn't put in until a criteria is met and then it could become either a market order, limit order or a trailing stop.
    24 Sep 2010, 07:00 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3324) | Send Message
     
    Fine and dandy, but maybe the more complex "investing" has become, the fewer people really want to get into it.
    24 Sep 2010, 08:15 PM Reply Like
  • radicall
    , contributor
    Comments (534) | Send Message
     
    I think investing is simpler than ever - point, click and then forget about it for a few years.

     

    Trading is what has become more complex. Stocks I own for fundamentals, I don't have to do anything unless there is a change in my thesis. I don't change the thesis based on intraday market movements.
    26 Sep 2010, 05:41 AM Reply Like
  • OptionManiac
    , contributor
    Comments (3324) | Send Message
     
    You are right, I should have used the word trading instead of investing. Sometimes I think that if more of us would just buy and hold, the big boys wouldn't have enough suckers to play with.
    26 Sep 2010, 06:15 PM Reply Like
  • User 425883
    , contributor
    Comment (1) | Send Message
     
    Stop loss orders give individual investors a small measure of confidence that they may be able to limit their losses. Without this protection many would get out of the market completely..
    30 Sep 2010, 12:34 AM Reply Like
  • radicall
    , contributor
    Comments (534) | Send Message
     
    I agree completely. I'll bet you a penny they just can't do it. I think uptick rule is what they need to put in. Otherwise a big money player can come in and short a lot of shares, kick off everyone's stops and cause panics.

     

    Volatility is coming back big time... I can see it's face hiding in the market
    30 Sep 2010, 05:06 AM Reply Like
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