Trailing Stop Suggestion from IB

[cpatte7372]

Hello All,

Below is a statement from Interactive Broker. I would to know if you agree with what they say about Trailing Stops - especially where they say, "trailing stop orders will accentuate volatility in rough markets" If you do agree can you please explain why?


NOTE: IB does not recommend trailing stop orders, as there is no guarantee that your order will be filled at or near the designated stop price, which is especially dangerous in rapidly rising or falling markets. In addition, trailing stop orders will accentuate volatility in rough markets.



Carlton

Cheers

Carlton

[MR]

I would still use a 'mental' trailing stop. Maybe not a computer entry, but in my brain I always have an updated idea where a stop should be placed when trading.

[cpatte7372]

Marc,

I fully understand when they say that there is no guarantee that your order will be filled at or near the designated stop price, however, can you explain to me what they mean when they say "trailing stop orders will accentuate volatility in rough markets"?

Thanks

Carlton

[dsmodi]

the BIG problem with 'mental' stops is there's a VERY good chance they don't get filled....

[DuaneG]

Hi Carlton,

As traders enter their trailing stop orders to protect the severity of a losing position, there can become a series of "invisible" selling points, which can drop the price of a stock even further. Many investors will usually have their trailing stops unconsciously close together as key support and resistance levels are usually obvious to most active traders. As the price of a stock continues to fall, these stop (sell) orders are met and further push the stock deeper into the sell off thereby accentuating the volatility. I hope this helps.

[cpatte7372]

Wow, Duane,

That really does help. Great explanation.

Cheers mate.

Carlton

[JJordan]

Re: Trailing Stop Suggestion from IB

Originally posted by cpatte7372

NOTE: IB does not recommend trailing stop orders,
as there is no guarantee that your order will......

IB guarantee's nothing ever!<g> But, I like that I can trade from my PDA with them !........

I started trading futures w/ them a few years back, now I have them for everything. No more Cybertrader, but they are good to.


So, IB and esignal's Quotrek make a pretty cool set of tools!

...oh, BTW,

a stop is where you realize you made a mistake..(that's where you place it.)..how slow are you?<g>

JMO