Topic: Guys, stop using stop orders - page 3. (Read 1116 times)

I agree with your sentiment because when I was trading much more earlier this year I often noticed how my stop orders would barely get hit then rebound like mad and that kind of drove me mad . Needless to say maybe I should have been better in my approach but now I add the coins to the exchange when I am ready to trade and not a minute earlier. Learning about how exchanges have control over your coins and you are helpless helped me learn, good thing I didn't have to learn the hard way by losing a bunch of altcoins.

Fair point, with forex brokers you might indeed just be playing against their books.

I just wanted to point something out about your point on unregulated Forex brokers. The difference here is that a Forex broker might well be taking the other side of your trade rather than placing it with an interbank dealer and therefore stands to gain when you lose. An exchange should be an entirely different type of entity that is simply matching orders of its clients and has no financial interest in whether you make a profit or loss. I know with crypto being mainly unregulated there will always be doubts but it is a different level of corruption if they actively help some clients over others. What Forex brokers do is actually legal believe it or not.

Sure, but not all exchanges are regulated, which makes their "behind the scenes" that much more invisible and thus harder to sue and prove anything. As an example, just look at the Forex industry (which in my opinion isn't very well regulated at all). Lots of scam brokers out there, and I'm sure you'd find lots of stories with people whose lawsuits went absolutely nowhere. Now, I don't know for certain what crypto exchanges do and do not do, but I'm guessing that due to the lack of regulation, the temptation to utilize that sort of information is pretty big.  I also agree with TheQuin on the point that pro traders have a rough idea where the stops might be, and they place their trades accordingly. That's a big factor as well.

And just to clarify, I'm not completely against stops. I do use stops as well but only on more or less liquid markets. They are ok as long as you use them wisely and understand all the risk involved.

I'm not sure you got my point though. If the market runs straight through your sell stop limit order and it doesn't get filled then you are still short and the market can still be falling fast while you are trying to manually exit. In that scenario, you will lose a lot more than the slippage on a stop market order.

If you really are that concerned about slippage then there are steps you can take to reduce it.

1) Stay away from illiquid markets and only trade coins with high volume on the biggest exchanges.

2) Learn where is safe to put your stops.

or otherwise

3) Don't trade.

This. Its there for a purpose, and many traders can attest to its effectiveness. I will never leave a position open without setting a stop order, especially when I cannot monitor price movements.

No, no way. Tell me just *1* advantage of a stop order over a stop limit. You'd just set your limit to zero, and a stop limit would become a classic stop (yeah sure, limit orders are normally scheduled after market, but at zero it would just mean market. The thing is that if there are that many market orders in a chain reaction, the last thing you want is to be the last of them and still be forced to sell).
But please don't tell me you would ever set your limit to zero, you would not. You would probably set it to 50%, 30% at worst. You well know that nothing drops 70% instantly without recovering at least a little, seconds later. And 70%, anyway, isn't a "stop loss", it's just a loss.

Yeah, but that's exactly the point.

When you place a stop order at 1000, do you agree to sell at 10? Of course not! No one does. But the exchange can end up selling at 10 and you are screwed.
Stop orders should not exist, they should always be stop limit, and then you are responsible for the limit. If you want a normal stop, then you simply put your limit at zero, which, admit it, you would NEVER do.

If a huge BTC megacrash was causing my BTC to sell at 100, I would be pretty pissed. There is no way the BTC would instantly drop to 100, without EVERYONE buying.

While I see the OP's point, i believe it is too much of a generalization not applicable to all cases. Stop order is a very important feature and trading and has saved me a couple of times already. The thing is you really need to learn how to use and know when and at what price to place stop orders. Generally if you are a newbie doing guesswork with trading, stay away from stop orders.

Wouldn't that be fraud in some way and the exchange operators can be sued? That would be a serious breach in security for all the users that entrusted them with money and should be given the right lawsuit. We never know what happens behind the scenes on a trading platform. All we know is that they have all the information we relay to them that can possibly screw is if they used it for other purposes other than identification, proof of transactions and what not.

Personally if I'm not around or I think I wouldn't be able to keep up with the trading action, I don't place any sell orders but usually buy orders. Stop-loss? I use it only if I have to do something real quick and be right back immediately afterwards. It also occurred to me that exchanges also manipulate the prices, up to a certain point where they can touch stop-loss in order to make quick profits. It would be fraud, but what do we know right?

The problem with using a stop limit order is that market is likely to run straight through it without getting filled. As a professional trader, I can assure you that always having a stop market order in place to protect your account is one of the very first things you are taught. The problem you are observing is simply that many traders make the mistake of placing their stop in the obvious place. It's not as above suggested that the exchange can see them it is just that experienced traders know exactly where inexperienced traders will put them. Running stops has been part of trading since it began and it will always be.

Indeed..

That's why shorting should be illegal.

That said, when it's an avalanche on all exchanges it seems legit enough. An avalanche on one single exchange would look more suspect.

& who even knows if this wasn't a test for the "Bitcoin futures" guys (or alike) to know how predictably they can bank on dips..

One other thing is that exchanges see where most stop orders are accumulated. Possession of this kind of info is extremely powerful and should not be underestimated. Seriously! You don't need a lot of funds to actually trigger an avalanche of stop orders and then buy cheap at the very bottom. And who knows what exchanges do with this info... maybe they use it internally, or sell it to the highest bidder.

Do people really have to lose money to understand what a (market) stop order is?

What I see on Bitfinex & GDAX is frightening. Some really have sold their NEO at $4 (& thus some lucky ones have bought). Some have sold their OMG at $3.
Did they mean to? Of course not. It has happened in the past, and poor users cried & threatened to sue exchanges.

Market stop orders shouldn't be used, and they shouldn't even exist for crypto or anything this volatile.
What we saw yesterday was the result of a cascade of stop loss orders, nothing else. There was hardly a manual panic, it was automated panic.

At first I thought that Bitstamp had crashed, but then I realized that maybe it had been closed on purpose for a short time, to avoid this (especially considering Bitstamp had been pointed for such problems with stop orders in the past).

These are automated, they probably get a higher priority, happen very fast, hog servers, not even leaving buyers a chance to buy.
Perhaps all exchange need a protection for this, really freezing on purpose when this kind of crap occurs. There is a big difference between a panic sale that comes from humans, and the one from a cascade of stop orders.

So stop using stupid market stop orders. Use a limit stop order if your exchange offers one, or just don't.
Pretty sure that all exchanges will now start to turn their market stop order into limit ones, after this event, or the next ones. It's not even a bug, it's offering the wrong tool for the market.

Or... keep placing stop orders.. and give your money to some lucky guys who will make 300% in a few seconds.