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Frequently Asked Questions

Market Lab Report
I use stop loss orders because I cannot constantly monitor my stocks' prices. How common is it for market makers to drop a stock's price in order to shake out stop-loss orders?

Q: I use stop loss orders because I cannot constantly monitor my stocks' prices. How common is it for market makers to drop a stock's price in order to shake out stop-loss orders? My positions are fairly large, about $100K.

 

A: Stop loss orders are fine if you cannot monitor your stocks. Given your position size of $100k, your stops could be artificially triggered, so our advice would be to always put your stops at logical points with perhaps an additional 1-2% cushion to avoid getting artificially triggered.


Published: Nov 10 2010