Question for the Old Timers on Stop Losses

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would not use a stop loss to protect my investments. We had a flash crash a few years ago that triggered many stop losses on individual stocks, not sure about the ETFs, and those positions recovered their losses within minutes. I would just be diversified to manage my risk in investments.

A similar event could happen again. And the powers that be never fully explained the reasons for that event.

Who are the powers that be and what explanation might they give for the flash crash?

The 2010 flash crash, which saw the Dow Jones Industrial Average lose almost 9% of its value in minutes, was a complex event triggered by a combination of factors, including a large sell order, high-frequency trading, and market structure issues. A mutual fund's automated sale of $4.1 billion in E-mini S&P 500 futures contracts initiated the initial price drop. High-frequency traders, who trade at extremely high speeds, exacerbated the decline by rapidly buying and selling contracts, creating a "hot potato" effect.

Great. So a free market powered by technology did what it was capable of doing.

Because from the previous post by the pp, we were led to believe that there is some secret group of powerful people pulling the market strings behind the curtain.

[Anonymous]

Anonymous wrote:Nope. We have just held steady.

+1

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would not use a stop loss to protect my investments. We had a flash crash a few years ago that triggered many stop losses on individual stocks, not sure about the ETFs, and those positions recovered their losses within minutes. I would just be diversified to manage my risk in investments.

A similar event could happen again. And the powers that be never fully explained the reasons for that event.

Who are the powers that be and what explanation might they give for the flash crash?

The 2010 flash crash, which saw the Dow Jones Industrial Average lose almost 9% of its value in minutes, was a complex event triggered by a combination of factors, including a large sell order, high-frequency trading, and market structure issues. A mutual fund's automated sale of $4.1 billion in E-mini S&P 500 futures contracts initiated the initial price drop. High-frequency traders, who trade at extremely high speeds, exacerbated the decline by rapidly buying and selling contracts, creating a "hot potato" effect.

Great. So a free market powered by technology did what it was capable of doing.

Because from the previous post by the pp, we were led to believe that there is some secret group of powerful people pulling the market strings behind the curtain.

No matter what the cause is, if a market as liquid as the DJIA/S&P can drop 10% in minutes (and then rebound), it's not a great argument for stop losses.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would not use a stop loss to protect my investments. We had a flash crash a few years ago that triggered many stop losses on individual stocks, not sure about the ETFs, and those positions recovered their losses within minutes. I would just be diversified to manage my risk in investments.

A similar event could happen again. And the powers that be never fully explained the reasons for that event.

Who are the powers that be and what explanation might they give for the flash crash?

The 2010 flash crash, which saw the Dow Jones Industrial Average lose almost 9% of its value in minutes, was a complex event triggered by a combination of factors, including a large sell order, high-frequency trading, and market structure issues. A mutual fund's automated sale of $4.1 billion in E-mini S&P 500 futures contracts initiated the initial price drop. High-frequency traders, who trade at extremely high speeds, exacerbated the decline by rapidly buying and selling contracts, creating a "hot potato" effect.

Great. So a free market powered by technology did what it was capable of doing.

Because from the previous post by the pp, we were led to believe that there is some secret group of powerful people pulling the market strings behind the curtain.

No matter what the cause is, if a market as liquid as the DJIA/S&P can drop 10% in minutes (and then rebound), it's not a great argument for stop losses.

I worked on Wall Street and High Frequency trading can work like this. You have the NASDAQ Data center in NJ for equities, Nasdaq also has data center for options in same building. Goldman also has Co-location in building. Meaning they have servers right by Nasdaq servers. Now Goldman has their Black Box in that Data Center. Meaning preprogramed it executes trades at lightening speed. It is looking at market, prices of puts and calls, can act automatically on preprogramed events. Now this is true the Goldman Black box and Servcer is around 20 feet from Nasdaqs server. So it means Goldman executes trades at the Speed of Light over 20 feet. Btw othe people also have servers there. These things can happen in small miliseconds. You have no time to respond. Let me put it this way. If you are 21 feet from data center Goldman at 20 feet will beat you to execution. Now imagine for fun you are in Bethesda Maryland and hit sell at same time at some one in Baltimore, Philly, Princetown NJ they all get executed first. YOu cant out run it. So the stop loss happens you cant react quick enough to buy back in if a flash crash. .

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would not use a stop loss to protect my investments. We had a flash crash a few years ago that triggered many stop losses on individual stocks, not sure about the ETFs, and those positions recovered their losses within minutes. I would just be diversified to manage my risk in investments.

A similar event could happen again. And the powers that be never fully explained the reasons for that event.

Who are the powers that be and what explanation might they give for the flash crash?

The 2010 flash crash, which saw the Dow Jones Industrial Average lose almost 9% of its value in minutes, was a complex event triggered by a combination of factors, including a large sell order, high-frequency trading, and market structure issues. A mutual fund's automated sale of $4.1 billion in E-mini S&P 500 futures contracts initiated the initial price drop. High-frequency traders, who trade at extremely high speeds, exacerbated the decline by rapidly buying and selling contracts, creating a "hot potato" effect.

Great. So a free market powered by technology did what it was capable of doing.

Because from the previous post by the pp, we were led to believe that there is some secret group of powerful people pulling the market strings behind the curtain.

No matter what the cause is, if a market as liquid as the DJIA/S&P can drop 10% in minutes (and then rebound), it's not a great argument for stop losses.

The idea of "stop losses" is utterly preposterous.