On Friday afternoon I was surprised to see a notification for a stop loss on my account that had triggered and wanted to share this with the community and if anyone has some insight into why this got triggered I would glad to hear whilst I wait for a reply from Freetrade customer support.
So I had a stop loss set at Ā£17.61 on Ā£SSLN (IShares Physical Silver) and this triggered at 13:30 on 31/3 despite from what I can see the low for the day being Ā£18.42 and closing on the day at Ā£18.61.
This is very concerning and has made me question the integrity of Freetrade, this error meant I was over Ā£400 out of pocket at close of play that day which I am rather annoyed about.
Edit: Looks like I have my dates wrong. Yahoo doesnāt have a lot of data for the 31st it seems. Itās still unlikely to be an error. Iād suggest messaging Freetrade in app if you want a full explanation.
@danbeddows thanks for the reply; the data I have found for the 31/3 is very limited short of having a Bloomberg terminal I cannot see how SSLN got as low as Ā£17.61 on that day but can always be proven wrong, there was no significant sell volume esp. to warrant >5% price drop.
I did message someone on the app and got very unhelpful generic response so Iāve now raised a formal complaint and am awaiting a response with a detailed breakdown of this trade execution.
Wonāt be doing any trading on Freetrade until I get to the bottom of this.
Thanks for the info @Eden, that aligns with the limited data available in Yahoo finance; Iām hoping it wonāt take too much longer to get an official response.
Unfortunately Iām no expert so hoping someone can add some context here as it looks like someone wanted to pay Ā£15.50 despite the last price being Ā£18.61 and this meant Freetrade sold my shares to satisfy this buyer? No sane person would accept that trade unless you were extremely desperate.
Iām sure I am missing something here but hereās hoping someone out there can explain this to me as Freetrade customer service have failed to do so.
My suspicion would be that itās a mix of the low bid/ask and the lower number of trades and volume put the stop loss at high risk of executing well below your set price
Freetade do warn of this issue with stop loss orders in their execution policy
So if Iāve got this correct; the spread on this stock was rather large yet I had no intention to sell, I only put a stop loss in place to act as a back stop so I could keep some profits. Yet Freetrade interpreted my stop loss as a must sell now as someone is only willing to pay 5% below ask price?
Where did these spread anomalies come from as 500ms later the spread was back down to 1.3%?
Given Freetrade doesnāt charge for trades it was my belief that such business models rely on spreads to make money but executing this order made someone Ā£428 to my detriment.
Freetrade does not even provide information to such spread information in itās over simplified UI and certainly doesnāt seem to highlight the risks relating to stock liquidity.
Is this a very low volume stock? it seems weird that the spread would widen by that much for such a short time. But I guess itās possible if there are literally no higher bids. which could happen with low volume I guess?
It isnāt so much that someone wanted to pay Ā£15, who wouldnāt want to pay Ā£3 less?
itās more that there were no buy order for more than that, so your stop loss was briefly higher than the highest bid on the order book
Correct me if Iām wrong but a buyer could declare any bid price (in my case 5% below last price) and then Freetrade algorithms use the mid price to trigger any stop loss, in reality one would not sell in this situation.
I donāt see any mention of mid price in the order execution policy and as I mentioned us users cannot even see this information.
Perhaps. But it seems in this case you did tell them to sell by placing the stop loss. A stop loss will have higher risk for lower volume stocks of executing further below your trigger
If you feel that this shouldnāt have happened then your next step would be a formal complaint to Freetrade. If your unsatisfied with their answer you need to ask for a final response or wait 8 weeks if I remember correctly for a final response and then go to the ombudsman if your still not satisfied with the response
No it doesnāt work that way. yours triggered because that was the highest bid on the order book. Normally there would be other buyers with a higher bid, so the bid price wouldnāt fall that far. Thatās why I asked if it was a very low volume stock
Iām still learning here very quickly now that I have been denied a significant gain on a short term trade.
Can you please elaborate @Dave as to how this does work as what you said doesnāt seem to contradict my statement but adds context about volume/liquidity.
My interpretation of the situation is this:
The highest bid on the order book was 17% below last price so Freetrade saw this as a good time to execute my stop loss selling all 428 shares at an average price of Ā£17.61 yet I (and I assume most investors) wouldnāt sell their shares 5% below last price unless they were desperate (which I was not).
I put the stop loss in place to protect me on the downside not to limit me on the upside; when you create a stop loss in Freetrade it has an image showing the chart going down and even encourages you to set a value a reasonable % below last price; it is reasonable to assume the stop loss then relates to the last price.
Even if the highest bidder was 17% below last price if no one is willing to sell at that price then they donāt get what they want, yet Freetrade said āYes here ya go have a bargainā, who was on the other end of that trade? Why was the bid so much below last price and only for a fraction of a second (someone trying their luck?)
This stock was on the up all day and I had no intention of selling so was frustrated to see my stop loss had triggered 5% below the last price; last time I checked Freetrade doesnāt support trailing stop losses and the liquidity risks of particular stocks isnāt apparent to simple investors. I canāt image Iām the only simple investor to be caught on the wrong side of this and feel that Freetradeās algorithm has cost me financially here.
I would be cautious using a stop loss on any low volume security on any platform unless youāre sure what the outcomes might be. Freetrade using almost all the same venues as HL for example. And both brokers give the same warnings on the risks around volumes etc
Stop losses imo shouldnāt be used on attempts to make quick turn around on short term stock. Stop loss imo is more of a kill this now no matter the price last resort. Something youād maybe use for a stock well in āprofitā that youāre unsure on the future of or maybe expect volatility and want it to sell at any cost if it ever touches a certain price
