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Flash crash impact?
Old 05-06-2011, 04:32 PM   #1
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Flash crash impact?

With today being the anniversary of the flash crash one year ago, I am reminded that it triggered a sale of my shares in Cisco (which in retrospect doesn't seem so bad!). That was the only effect it had on my portfolio.

Anyone else have any experiences from that day they'd like to share?
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Old 05-06-2011, 06:12 PM   #2
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Why did it trigger a sale? I had no transactions on that day.

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Old 05-06-2011, 06:16 PM   #3
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I had a trailing stop limit order on it and boy, did it kick in
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Old 05-06-2011, 06:43 PM   #4
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It convinced me to always use limit orders.
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Old 05-06-2011, 06:45 PM   #5
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I had a couple of orders in for Schwab EFTs that were well below the market both of which got triggered. One of the orders was in my IRA and since I didn't have sufficient funds in my IRA to pay for the stock, Schwab slapped my wrist and put trading restrictions on my account for 6 months. I had to sell the funds the next day and made a few thousand bucks, as I told the Schwab reps it was well worth the wrist slap. Heck it probably was worth smack on the butt. Depending on who was doing the slapping
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Old 05-06-2011, 06:48 PM   #6
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Originally Posted by clifp View Post
I had a couple of orders in for Schwab EFTs that were well below the market both of which got triggered. One of the orders was in my IRA and since I didn't have sufficient funds in my IRA to pay for the stock, Schwab slapped my wrist and put trading restrictions on my account for 6 months. I had to sell the funds the next day and made a few thousand bucks, as I told the Schwab reps it was well worth the wrist slap. Heck it probably was worth smack on the butt. Depending on who was doing the slapping
Good for you! I'd talk to The Chucks for a few thousand bucks!
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Old 05-06-2011, 07:52 PM   #7
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Originally Posted by steelyman View Post
I had a trailing stop limit order on it and boy, did it kick in
That's what I figured. For the life of me, I don't understand why people place stop orders. Talk about buy high, sell low!

Yeh, I know, it's to 'limit your losses'. Right. Just once I'd like someone to point me to a well done study that proves that the limit protection isn't outweighed by the number of sells that get triggered on a blip which recovers. Or the successful mutual fund that relies this technique.


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Originally Posted by photoguy View Post
It convinced me to always use limit orders.
I assume you mean limits on your buy orders. I almost always do that, sometimes skip it on a very liquid stock/ETF when it's more important to me to get a fill than it is to squeak out a penny or two. I wish I had a ton set at 30% below market at this time last year!


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Originally Posted by clifp View Post
... One of the orders was in my IRA and since I didn't have sufficient funds in my IRA to pay for the stock, Schwab slapped my wrist and put trading restrictions on my account for 6 months. I had to sell the funds the next day and made a few thousand bucks, as I told the Schwab reps it was well worth the wrist slap. ...
I've got some ominous warnings when I purchased stuff and the previous sell trade had not settled. Something to the effect that I can't sell what I bought until after things settled. But no actual wrist slap. I assume I'd actually be locked out from doing it anyway, but I never tried (never had the need to). They are just following fed rules I guess (or their interpretation of them).

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Old 05-06-2011, 08:03 PM   #8
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That's what I figured. For the life of me, I don't understand why people place stop orders. Talk about buy high, sell low!
Well... it is possible to not place the trailing stop limit until after the stock has appreciated to the point where selling at the limit price does not mean "sell low".
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Old 05-06-2011, 08:37 PM   #9
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Well... it is possible to not place the trailing stop limit until after the stock has appreciated to the point where selling at the limit price does not mean "sell low".

It's still selling low if you get stopped out on a blip and it recovers. Regardless where you bought it.

The only effective method I've seen to reduce your exposure to downside risk is to reduce your exposure period. Everything else costs money (buying puts, getting stopped out), and very probably more money than it is worth. Otherwise, everyone would do it.

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Old 05-06-2011, 09:33 PM   #10
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If it hadn't been in the news, I'd have never noticed that it happened.
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Old 05-06-2011, 09:51 PM   #11
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I didn't make any transactions last year in May or June. In fact, other than rebalancing in early January I haven't done much at during the past year.

I did buy some Total Bond Market Index in March of this year. The reason was that I didn't need as much cash on hand, since we decided not to move.

With the market doing as well as it did during March and April, I think we all probably feel like geniuses no matter what we did.
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Old 05-06-2011, 10:00 PM   #12
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It's still selling low if you get stopped out on a blip and it recovers. Regardless where you bought it.

The only effective method I've seen to reduce your exposure to downside risk is to reduce your exposure period. Everything else costs money (buying puts, getting stopped out), and very probably more money than it is worth. Otherwise, everyone would do it.

-ERD50
Given the fact that all that happened while I was at work (I am still not retired), the limit worked quite well, which was my original intention. No money lost, just sold one stock and then bought another. All's OK with the world, on to other discussions
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Old 05-07-2011, 05:01 AM   #13
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Originally Posted by ERD50 View Post
That's what I figured. For the life of me, I don't understand why people place stop orders. Talk about buy high, sell low!


I've got some ominous warnings when I purchased stuff and the previous sell trade had not settled. Something to the effect that I can't sell what I bought until after things settled. But no actual wrist slap. I assume I'd actually be locked out from doing it anyway, but I never tried (never had the need to). They are just following fed rules I guess (or their interpretation of them).

-ERD50
I used stop losses when I first started investing in my early 20 after the first or 2nd one was triggered, I decided stop losses were stupid. I can be a slow learning in many things, but thankfully not investing.

I had previous liquidity violation in my IRA a few months before the flash crash, I guess two in six months violates some SEC or perhaps Schwab risk management rule. I completely understand Schwab's concern. If the market had continued on down to say Dow 1,000, I would have owed $15,000 more than was in the IRA, and had no way of depositing additional funds due to IRA funding limitations. On the other hand if the market was at Dow 1,000, I am guessing I would not have been the biggest problem Schwab (or the country faced)
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Old 05-07-2011, 08:40 AM   #14
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Originally Posted by ERD50 View Post
I've got some ominous warnings when I purchased stuff and the previous sell trade had not settled. Something to the effect that I can't sell what I bought until after things settled. But no actual wrist slap. I assume I'd actually be locked out from doing it anyway, but I never tried (never had the need to). They are just following fed rules I guess (or their interpretation of them).
-ERD50
Yep, you have to be very careful in an IRA. A couple of weeks ago I executed a put spread in my IRA. I bought the 46's and sold the 44's. To my surprise, they made me cash-secure the short puts at $44 per share even though they were hedged by the long 46's. Their reasoning (and I agree) was in the event of an assignment, I could theoretically end up not having the funds to pay for the assignment for one day; since if I were assigned on the 44's, I wouldn't find out until the next day. If I then exercised the 46's, that trade wouldn't settle for three business days, while the assignment would settle one business day prior. Of course, in a taxable margin account, this would be perfecty legal since the funds could be borrowed for one day. However, borrowing is not allowed in an IRA.
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Old 05-07-2011, 09:05 AM   #15
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Market timers will always have regrets. For long term investors (as DW/I are), it's nothing more than a blip in the long term market stats.

We did nothing....
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Old 05-07-2011, 10:16 AM   #16
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I have learned my lesson from 2009 and didn't do anything. I no longer panic with personal stock picks and sell at great loss as I have done in 2009.
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Old 05-07-2011, 12:50 PM   #17
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It reminds me that I could have made a boat load of money if I spent every minute watching the market. It was basically over before I even knew about it.

It also reminds me how happy I am not to spend every minute watching the market any more.
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Old 05-07-2011, 02:31 PM   #18
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Since I sit at a computer all day at work, I noticed the market got squirrelly, so just before going to a meeting I entered a limit-buy about 10% below the current ask for an ETF. Once out of the 2 hour meeting and much to my surprise I found out my order had executed and the ETF price had already recovered. This was not one of those trades that got busted, so it did stick.

This was one reason that my Roth IRA was up 40% over the last year.

I wish there was another flash crash.
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Old 05-09-2011, 08:53 AM   #19
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I don't remember any catastrophes happening on that particular day, but my portfolio had topped out on April 23, 2010. It had cooled off a bit after that, and then fell, and by May 20 I was down about 13%.

I had just attributed it to one of those ~10% "corrections" that my portfolio seems to get hit with every once in awhile, along with the "sell in May and go away" thing. FWIW, my portfolio dropped slightly through June, ultimately bottomed out on July 2 of 2010 at about 13% below that April 23 peak, and since then for the most part it's been nowhere but up, except for a little blip in March.
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Old 05-09-2011, 09:31 AM   #20
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Originally Posted by LOL! View Post
Since I sit at a computer all day at work, I noticed the market got squirrelly, so just before going to a meeting I entered a limit-buy about 10% below the current ask for an ETF. Once out of the 2 hour meeting and much to my surprise I found out my order had executed and the ETF price had already recovered. This was not one of those trades that got busted, so it did stick.

This was one reason that my Roth IRA was up 40% over the last year.

I wish there was another flash crash.
I was trying to do exactly this, but fidelity's servers were overloaded and I couldn't log in to place any limit orders.

The only impact for me is that it makes me consider placing long term limit orders well below the market price. I would have to be vigilant in monitoring and updating those limit prices, so I have not actually taken the steps to place any well below market limit orders for the long term.
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