Stop Loss Orders and Liquidity

Includes: AGG, GLD, LQD, MDY, SLV
by: Richard Shaw

Persistent trailing stop loss orders are important risk management tools that close positions when they deteriorate beyond levels you select before adverse market action.

When a stop loss order is triggered, it executes a market order. The liquidity of the security being sold is a key factor in determining how close to the trigger price your exit price will be.

The more the dollar amount of trading, the cleaner your exit will probably be. If your position is large in comparison to short interval trading volume (such as per minute), your exit on a market order may not be satisfactory.

This table of average dollar trading volume per minute yesterday (2010-04-27) for ETFs with strong upward trending price charts AND trading more than $100,000 per minute on average throughout the day may be helpful to you. Note that some of the most heavily traded ETFs are not in the list, due to the condition of their charts at the time of the filter.

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Holdings Disclosure:

As of April 27, 2010, we hold IWM, GLD, MDY, SLV, AGG and LQD in some managed accounts, but do not have current positions in any other securities discussed in this document in any managed account.


Opinions expressed in this material and our disclosed positions are as of April 27, 2010. Our opinions and positions may change as subsequent conditions vary. We are a fee-only investment advisor, and are compensated only by our clients. We do not sell securities, and do not receive any form of revenue or incentive from any source other than directly from clients. We are not affiliated with any securities dealer, any fund, any fund sponsor or any company issuer of any security. All of our published material is for informational purposes only, and is not personal investment advice to any specific person for any particular purpose. We utilize information sources that we believe to be reliable, but do not warrant the accuracy of those sources or our analysis. Past performance is no guarantee of future performance, and there is no guarantee that any forecast will come to pass. Do not rely solely on this material when making an investment decision. Other factors may be important too. Investment involves risks of loss of capital. Consider seeking professional advice before implementing your portfolio ideas.

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