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Lesson Learned: In Favor of Limit Orders...
Old 09-22-2008, 08:01 PM   #1
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Lesson Learned: In Favor of Limit Orders...

This past Friday I placed a market order on Schwab for a small amount of VTI (Vanguard's Total Stock Market ETF) at the market open. It was trading in the 60's. I knew it would be a volatile day -- I figured a few percent either way for the total stock market would be the worst case. I'm a long-term investor and didn't care about that kind of fluctuation. But the order executed about 30 minutes later in the 80's! Then VTI immediately dropped back down to the 60's -- a 25% loss right out of the gate!!!

I immediately called Schwab and they agreed it didn't look right and said they'd investigate it. Thinking about this over the weekend, I realized it almost surely had to be a trading error: no way the total market had spiked like that. Indeed, this afternoon, Schwab called back to say the order was cancelled -- some issue with erroneous execution due to specialists being overwhelmed by the volume on Friday. I immediately replaced my order (this time with a limit), it executed at a reasonable price, and all is well in my account.

Lesson learned: even if you aren't a trader, even if you're buying some relatively stable broad index, it may be advisable to use limit orders, especially in these volatile times. This story had a happy ending, but I would have saved myself a lot of anxiety by using a limit order in the first place!

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Old 09-22-2008, 08:16 PM   #2
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There was/is a good thread on the busted trades on Friday over on the bogleheads site: Bogleheads :: View topic - VG ETF Screwup - Help!

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Old 09-22-2008, 08:23 PM   #3
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My quotes for VGK, VPL, and VWO have been squirrelly since last Friday...

Google says VGK and VPL are "errors", and MSNQuote's Excel add-on won't quote VPL or VWO. Yahoo started quoting all three again, but I'm not sure there their they're accurate...
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Old 09-22-2008, 08:24 PM   #4
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I noted that VTI was showing as unpriced in my Schwab acct Friday morning. When I clicked for details, VTI showed with a high for the day in the low 80's and, by then, was in the 60's. It seemed very strange.

Agree with you 100% on limit orders and almost always use them.
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Old 09-22-2008, 11:28 PM   #5
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I saw that spike and was wondering what happened. Other ETFs (IVV) show the same behavior. I'm glad you didn't get burned. Thanks for the report and reminder.
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Old 09-22-2008, 11:40 PM   #6
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Good reminder headingout. I have seen crazy spreads on everything from thinly traded options and closed end funds, to stocks with massive volume like Wells Fargo, and Bank of America. Last Friday both BAC and WFC dropped nearly 10% in a matter of minutes from the pre market sessions. Of course somebody made a multi million dollar mistake when the bought several hundred shares of Berkshire at $147,000 instead of some in the $137,000.
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Vanguard ETF squirreliness
Old 09-23-2008, 10:43 AM   #7
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Vanguard ETF squirreliness

Just to add to the fun, Vanguard moved it's ETFs from the AMEX on Thursday to the NYSE on Friday. Most of the web-based quote systems (Yahoo, Google, etc) didn't handle getting a close on one exchange and an open on a new exchange well. Google didn't start getting quotes for these funds from NYSE til the weekend.
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Old 09-23-2008, 12:26 PM   #8
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Limit orders for buying, stop loss for selling. Just do it!!

Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)

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