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What percentage to use in limit sell orders?
Old 10-26-2010, 04:22 PM   #1
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What percentage to use in limit sell orders?

I was wondering what percentage others use for limit sell orders

http://www.ehow.com/facts_5128022_limit-order-stock-trading.html

in order to survive big loss days? Any thoughts on doing this? I was thinking about 5% to be what i'd set my volatile stocks.

Any thoughts?
thanks in advance!
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Old 10-27-2010, 06:01 AM   #2
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If you are thinking about trailing stops, you are invested in the wrong stuff. If the heat is too much, get out of the kitchen. Otherwise, just ignore the minor short term fluctuations.
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Old 10-27-2010, 06:24 AM   #3
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5%? WHy even invest? 10-15% maybe. Also, stops can be pretty worthless if the stock you own is volatile. I recall some Lucent stops that stopped out $9 below the stop price........that can happen easily again, or worse.......
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Old 10-27-2010, 07:59 AM   #4
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I would not use them at all. I think you are most likely to lock in losses and miss out on gains than to "protect yourself".

Can you point to any successful mutual fund that uses this strategy? Can you point to any well constructed study that shows that this approach improves total returns?

If you want to protect yourself at some point, you could buy puts. Then you know exactly what you are losing - no loss of gain outside the premium you pay. Like brewer says, investing is all about risk/reward - if you don't like the risk in these stocks, you probably should not be buying them.

And if you think you have some simple magic formula to collect gains and stave off loses, I have a design for a perpetual motion machine to sell you

edit/add: Can you say "Flash Crash"?

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Old 10-27-2010, 08:18 AM   #5
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Well, to fix FinanceDude's issue.... you can do a stop limit... that way if there is that flash drop, and it goes down $9 below what you want to sell at you do not sell...


I have used stops before... most of the time they expire and nothing happens.. I have had a few trade and was happy... to me it is just putting down what you want to happen IF this happens...
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Old 10-27-2010, 08:28 AM   #6
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You need to be careful you enter the order the right way. Remember that recent glitch when Procter and Gamble was very briefly down more than 20 points and the Dow was down by 1000? That would have been a bad time to have a plain vanilla stop loss order in place.
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Old 10-27-2010, 09:19 AM   #7
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Quote:
Originally Posted by Readysoon View Post
Any thoughts on doing this?
Market makers love you guys. You'll get whipsawed like a bungee jumper.

Sell stops don't work well when you most want them to. They're also manipulated to stop you out when you least want it to happen.

Either trade the momentum, don't take your eyes off it, and exit before the close... or buy on the fundamentals and sell when it's fully valued.
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Old 10-27-2010, 03:39 PM   #8
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Thanks everyone for the advice, I'll avoid these in the future, appreciate your taking the time to respond.
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Old 10-28-2010, 10:58 AM   #9
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I went away on Holiday(sea kayaking in Mexico)once put 5% stops on everything. Came back the market was 10% higher, but I got stopped out.
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