Topic: Guys, stop using stop orders - page 2. (Read 1116 times)

I agreed. Stop orders are not bad. The question is how you are using it. If you are just playing guessing game with stop orders, trading is not for you.

There are alot of confusion in trading that if you don't have strategy that works for you it is not good to buy into any trading opportunities. Many traders has actually lost huge amount of money because of this place an order in trading platforms. Placing a trading orders is good for margin trader and not buying into a particular coins. If you bought neo cheap you have to wait for it to grow before sell it like every other markets and placing on stop under on neo will ever make you to lose money as this market is higherly volatile and fluctuate alot.

This really has a huge impact on the community, but these are also the whales that change the direction of the market.

ok, so we at least agree that in a fast market, chances are that the stop won't be processed.

We just don't agree on whether it's a good thing or not. I'll still maintain that there is always a price at which we don't wanna sell, a price that can only be reached because of technical limitations, nothing linked to the market itself, that is, nothing linked to demand & offer at all.

A stop loss final sell price should be based on the lowest demand, and it simply is not. It is based on the lowest demand in the current order book, which is only one part of the demand.

And you keep saying that a stop has its uses, when things like the mini-temporary crashes in the ETH example don't happen. But no one can predict when they happen, so the fear is always there.
Normally the guy who got his ETH sold for a few cents should have had his ETH sold to the highest bidder in a normal, "human time" auction, in which all of his ETH would hae been sold way way above 10 cents. Perhaps 75usd at the lowest. Which would have still been a bargain for the buyer, and would have been way better for the seller.
The books only represent those who are ready to have a lot of fiat stuck doing nothing in the exchange (which is already a risk in itself), not the ones who have some fiat & are ready to buy opportunities when they see them coming, which I believe is the majority.

Regarding what happened with bitfinex, this was done to merge marginal traders, but not those who bet, the stop loss. If you went into the deal and put a stop loss under the support line -3%, then what losses are we talking about? If the asset went into growth, then you move the stop loss higher and at any strait of the course, you exit the stop order already in the plus. More suitable: do not use margin trading, especially on bitfinex with their tether and straits.

That is all I am trying to explain.


You left out the "in a fast market".


Not specifically, you can choose the offset.


Yes, it does if you set the limit and stop at the same price. This makes sense when using one to enter a trade, typically in a breakout play. You use the stop to trigger your entry and by using the limit you avoid any slippage. If it fails to get filled no harm is done you just missed the trade.


Precisely. The stop just triggers the placing of a limit order. If there is no corresponding order at or better than your limit price it is not possible for the order to be matched and therefore it will not get filled.
If using a stop market gets filled at a certain level then that is the best possible level a stop limit could have been filled in. If your stop limit was outside that range then it would not have been filled. It is possible the market could turn around and eventually your limit gets filled but that is exactly the same thing as trading without a stop and just praying the market come back to you. 

I didn't realise that you needed it explaining at such a basic level.

I never used stop limit order in crypto trading, but it's really a useful tool in forex. I think Stop orders are not generally bad in crypto too, but people should use it without understanding what could happen.

You haven't explained anything, you just said it would never be filled. Perhaps you're talking of a stop order that would have its limit at the stop price, which isn't something that exists in any exchange, because that wouldn't make sense.

Stop limits have a price trigger and a limit price, they are separate.

I have explained it to you already, you don't want to take good advice so I'll leave you to find out for yourself.


I'll give you the example of when the SNB announced that they would no longer support the CHF in a pegged range with the EUR. Not only were many traders wiped out whole Forex brokerages were as well. These things happen, it is part of the risk of trading.

Not understanding the implications of the difference between a stop market and stop limit and when to use them is a good way to increase that risk.

of course it's possible, Bitfinex has a stop-limit, Kraken had (before becoming worthless), & a lot of other exchanges I'm sure.




yeah, I often have low orders to benefit from those cascades, but you need a lot of fiat sitting on the exchange for that.
That said, 1000 at 10 cents, that's just 100, quite doable to place one order for each currency.

Why wouldn't it be filled?

If you set your stop at 50, and your limit at 10, there, if it drops below 50 and you're near the top of the book, you will sell at 40, 30, 20 maybe. In any case, at prices you're ok to sell at.
If you're the last in the book and there aren't enough buyers, it will indeed NOT sell at 5. But that's the whole point!, you normally DO NOT WANT to sell at 5.

Let's face it, your value was 100, selling at 5 is pretty much the same as losing. 5 is no value. If it doesn't stop at 5 and goes down to 1, sure, you've lost even more, but you had pretty much lost everything anyway.
The reason you do not want to sell at 5 is that you are pretty much guaranteed (& you know it) that if a market falls from 100 down to 5 in a minute, it doesn't mean no one wanna buy, but it's a chain reaction of stops and no one IS GETTING A CHANCE TO BUY.

You are pretty much guaranteed that if your share goes from 100 down to 5 in a minute, it will go back to 10, 20 or 30 a few minutes later. So why the hell would you want your stop to sell at 5 and lose every chance to get back to a decent level?

The guy who got his ETH sold for a few cents, that's just not normal, it's a technical problem, not a human problem. Had the guy been given access to a stop limit, he would not have set his limit to a few cents. He would have set his limit to like 100usd (I mean come on, an ETH at 100, pretty much guaranteed to sell), thus his stop would indeed NOT have been processed, and he would have been happy with it.
Sure, he has to be aware of the technical problem behind stop orders, but he's not given an alternative. Which is why I advise to simply not use stops, unless you're certain that there won't be a massive drop, which just can't apply to crypto.
Bitfinex provides stop-limit, I really advise people to use that instead. This said, limits are normally processed after market orders, so it's not that ideal either, but still safer.




I gave examples that just happened, have happened a few weeks ago & made the news, and will happen again. The bitcoin seems to get its daily instadrop of 10% these days. So for alts it's even worse.

It's kinda the risk that comes with being a trader. I only buy and sell when I want to do that at the current price, or I place an order to sell above the current price. But I'm not a trader: I keep my coins and euros in my own wallet, until the moment I'm ready to make a transaction.
I've said it before and I'll say it again: whales love triggering stop orders, to trigger a cascading event up to very low prices. When that happens, the whale strikes and buys your coins at a very low price.
This is also why I don't worry much when Bitcoin drops a lot in a short time: it's all manipulation, stop losses being triggered, and panic sells. Right after that the price usually bounces back up when traders try to buy back the cheaper coins.

I'm not sure if it's possible on exchanges, but if I'd ever use a stop order, I'd want to be able to set a minimum price too. For example: sell at 6% drop, but don't sell anymore if it drops more than 20%.

You could also do the opposite: place very low buy orders at several exchanges, so you can be the guy who buys 1000 ETH at 10 cents each!

This is the point I'm really trying to correct you on more than anything else because it is so important to understand. In a fast market, a stop limit is completely useless as it will not get filled, it might as well not be there, and that is why professionals do not use them in this way.

The examples you give are very extreme cases of what can happen in an illiquid market. If the people in those examples did anything wrong it was simply not understanding the risks involved in trading. This also brings me back to my other point of not trading illiquid markets.


This is a very common misconception. You should see the futures markets after a major news release. The high-frequency algorithms running on specially built servers colocated at the exchanges make crypto look pedestrian. After the CME announced the introduction of Bitcoin futures in an interview the head of CBoE said that they had studied volatility and found Bitcoin to be in line with the VIX.

Also, you have to factor in the increased level of leverage we are using which amplifies the financial impact of that volatility. Crypto exchanges offer up to 3.3x leverage whereas I trade the Emini S&P 500 on a fixed margin of $400 per contract. The contract specification is a $50 multiplier and the minimum price increment 0.25 points making $12.50 per tick. At the time of writing this the current bid is $2640.75 giving a value of $132,037.50 so divide 400 gives leverage of 330x. That means price movements are amplified 10x in my PnL column compared to trading on Bitfinex. So the similar volatility to the VIX is actually 10x more when trading the futures.

Because it seems to be way easier & too tempting to manipulate market downwards than upwards.
Hell it even happened because of a simple tweet last time. That was just a rumor - ok, which got later confirmed, but still.

Of course shorting is legal, it's the ways that people shorting push the market down that are illegal, but how do you even prove such manipulations..


Was it a normal mini-crash, it depends which chart you look at.
If I watch BTC-EUR on Bitstamp, I think the 8000 to 7000 candle would have been avoided with better handling of stops. And then there would probably have a bit less panic afterwards. Instead of a 25% dip it could have been 15 or 20, maybe? And I do think the majority was a cascade of loss - that doesn't mean people wouldn't have sold manually if stops didn't exist. But they would probably have sold less. It's as much the very abrupt dip as the depth of the dip that causes panic IMHO.
But it's still ok. The cases of ETH/NEO/OMG are not ok at all.

Why should shorting be illegal? It is the same as speculating on the price increasing. I actually think it was simply just a normal crash, yes of course there were some stop orders thrown in there but not enough to see the falls that we did, at least not in my opinion.

Stop orders are not generally bad. Sometimes, coins are too early sold but often it protects traders agains big loss. I even look for a dynamic stop order.

Let me explain in depth.
-when you place a limit sell, say at 100, that's the price you wanna sell at, and either it will sell at 100 (in one or more chunks), or won't sell at all.
-when you place a market sell, you sell your share to the highest price of whoever is ready to buy it (in one or more chunks).

You can understand that if you have like 1000 BTC to sell, and you place a market sell, some will be sold at 100, some at 90, some at 85, etc.. and if you have many and the order books are small, some will end up sold at 1 cent.

So that's where the problem of a stop loss is, the price of your stop loss is the price that will trigger a *market* order. You placed a stop loss at 100, it will then sell everything to whoever wanna buy it, at 100 or under.

That happens instantly, thus it only applies to the existing order book, it won't leave a chance to anyone to buy manually.
And when many people have stop orders, the falling prices resulting from market sells will produce a chain reaction. There will be a huge lot of sells that the order books aren't ready to cope with, and your share for which you placed a stop loss at 100, may end up being sold at 1 cent. And some lucky guy who had placed a limit buy at 1 cent, managed to exploit your stop order & made a huge margin in no time.


But the problem you had was probably due to the volatility. You see the market price at 130, you place your stop at 100 and you think you're ok, but the high volatility can make the market price fluctuate heavily between say 90 & 150, fast enough that you don't even see it. You then think that the exchange triggered your stop order by mistake, but it didn't, it just went under 100 & bounced back so quickly that you didn't see it happening.
Even a stop+limit wouldn't have helped here. To place a safe stop you have to watch the order book chart, to see if there is a hole around the mid price, to see if there are chances that the mid price is likely to go up & down very quickly.

I couldn't understand your problem accurately since I'm a beginner, but I faced problem many times with my stop orders. In bittrex, many times they didn't work in the cases which they were supposed to work actually.

I can't understand what's wrong with my trading orders.

Let me take, again, that example of that guy who sold his NEO at $4. But we could take the other example of that guy who got his ETH sold at 10 cents, if it makes it clearer:
https://www.reddit.com/r/ethtrader/comments/6iokzy/gdax_just_sold_a_good_chunk_of_my_ether_at_10/
https://www.cnbc.com/2017/06/22/ethereum-price-crash-10-cents-gdax-exchange-after-multimillion-dollar-trade.html
That made the news some time ago, and people didn't learn from it.

What did that guy do wrong? HE USED A STOP ORDER. HE DID NOT DO ANYTHING ELSE WRONG.

Wouldn't YOU buy an ETH at 10 cents? Who wouldn't? Do you think that if you had asked the guy "hey dude, you put a stop order there, we're gonna sell your ETH at 10cents now, are you ok with that?" he would have replied YES? Yet, that is exactly the risk you take with a stop order, it shouldn't be there, you should be responsible for the amount of risk you wanna take.

People who place stop orders are idiots who believe that if they place it at 100, they are garanteed to sell at 100.
The only real stop order is a stop limit. If you wanna place a stop at 100, you will probably place your limit at 50, or whatever price you're still confortable selling at. But I SERIOUSLY doubt that you will place your limit at zero, or I don't understand what's wrong with you.
Everyone understands that if something falls from 100 down to 0.1 in a few seconds, it's not normal market behavior, it's just a large dump, or a cascade of stops. Then you'd rather keep your coin, hoping it will go up again, rather than simply losing it.
The guy who placed his stop order and saw all of his ETH sold at 0.1, pretty much lost everything, quite ironic for something called "stop loss", no?


Obviously professionnal traders will tell you that stop orders are useful, because they don't trade things THIS volatile for a living.

I really think all exchanges should at least implement stop+limit, and put limit by default to 50% of the stop price.

There are things that could be done, even though I can't imagine any exchange doing it. Like if an exchange gets into a cascade of stops, it enters a phase of "you can buy, but you can not sell for now", spreading the cascade over time.
For ex, the other day's dip would have been spread over like 10min. For 10min, all the stops would have been processed slowly. Any manual sell order would have been scheduled for after those 10min, but any buy order would have been processed immediately. It's quite sure that the dip wouldn't have been this large. Not only it would have dipped less, but it would have rised back faster because there would have been less fear. And things like the ETH or NEO case would simply have been avoided.
It'd be quite easy for an exchange to implement this "special mode" happening whenever a market falls over x% per second, or something.
That's also what whoever is not an idiot would do, if he had to sell a lot of shares. He would spread it over time, selling little amounts, letting the market go up again. Quite possible that the ETH case wasn't a cascade but just 1 stop on a way too large amount.

An alternate solution would be, whenever a cascade of losses is detected, to average all stop orders. That would be less useful, but it wouldn't produce random big losers.

To stop using stop loss is not a bad trading advice. But it is a very serious damage and advice that will send a trader with small portfolio capital home early. If your capital is huge that will carry you without stop loss , then it is good.