Q: This is rather a naive question from the trenches, I’m afraid, but nonetheless, I’m here to learn and hope you don’t mind.
In regard to stop loss orders, which I use on occasion, despite the very wise caveats I have garnered on this site, I am still at a “loss” on a certain aspect.
In the event that a certain stock plummets in after hours trading, at what point is one’s stop-loss triggered? Could I potentially lose far more than I think I will? Do stop losses provide only the illusion of safety?
For instance, if I put a stop loss on ABC company at $50, and in the after hours trading the stock drops down to $20, at what point does my stop loss get triggered? Does it get triggered in "after hours" or does it wait for the next day when my losses could be even greater? Does my stop-loss immediately become a market order once it reaches $50? And, if I haven’t put a limit on the loss, at what price will it sell? If the drop is immediate — and huge, — (i.e., if it drops from 50 to 20 without intervening bids), does my stock then get sold at $20?
I’m beginning to uncover a lot of “smoke and mirrors” in the trading-investing game, and it seems fraught with a lot of dangers that initially appear benign and helpful.
(That being said, if the stock drops from 50 to 20, I realize it wouldn’t matter anyway, but I’m using this for illustrative purposes only.)
Thanks for any help you can provide to demystify the stop-loss game. As ever, your answers are always appreciated.
In regard to stop loss orders, which I use on occasion, despite the very wise caveats I have garnered on this site, I am still at a “loss” on a certain aspect.
In the event that a certain stock plummets in after hours trading, at what point is one’s stop-loss triggered? Could I potentially lose far more than I think I will? Do stop losses provide only the illusion of safety?
For instance, if I put a stop loss on ABC company at $50, and in the after hours trading the stock drops down to $20, at what point does my stop loss get triggered? Does it get triggered in "after hours" or does it wait for the next day when my losses could be even greater? Does my stop-loss immediately become a market order once it reaches $50? And, if I haven’t put a limit on the loss, at what price will it sell? If the drop is immediate — and huge, — (i.e., if it drops from 50 to 20 without intervening bids), does my stock then get sold at $20?
I’m beginning to uncover a lot of “smoke and mirrors” in the trading-investing game, and it seems fraught with a lot of dangers that initially appear benign and helpful.
(That being said, if the stock drops from 50 to 20, I realize it wouldn’t matter anyway, but I’m using this for illustrative purposes only.)
Thanks for any help you can provide to demystify the stop-loss game. As ever, your answers are always appreciated.