Inappropriate Stop Loss Triggered

Hi everyone,

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 £17.61 on £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 £18.42 and closing on the day at £18.61.

This is very concerning and has made me question the integrity of Freetrade, this error meant I was over £400 out of pocket at close of play that day which I am rather annoyed about.

Any insights would be much appreciated!

Not to say it’s not impossible, but I highly doubt there was an error.

Looking back at £SSLN at this time, there was a lot of sell action.

The price may have briefly (even for a second) dropped to £17.61 and trigged the stop loss.

Edit: Looks like I have my dates wrong. Yahoo doesn’t have a lot of data for the 31st it seems. It’s still unlikely to be an error. I’d 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 £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 I’ve now raised a formal complaint and am awaiting a response with a detailed breakdown of this trade execution.

Won’t be doing any trading on Freetrade until I get to the bottom of this.

You’re trade isn’t listed, so I guess there is a question to ask them

tradeTime currency price volume tradeValue type micCode tradeType
2023-03-31T15:58:28.000 GBX 1859 502 9332.18 AT XLON N
2023-03-31T15:58:28.000 GBX 1859 502 9332.18 AT XLON N
2023-03-31T11:18:57.000 GBX 1845 250 4612.5 AT XLON N
2023-03-31T10:07:49.000 GBX 1847.5 120 2217.0 AT XLON N
2023-03-31T09:30:45.000 GBX 1844 27 497.88 AT XLON N

Thanks for the info @Eden, that aligns with the limited data available in Yahoo finance; I’m hoping it won’t take too much longer to get an official response.

Just had an update from Freetrade stating that the trade executed in line with their trade execution policy; providing the following screenshot:

Unfortunately I’m no expert so hoping someone can add some context here as it looks like someone wanted to pay £15.50 despite the last price being £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.

I’m sure I am missing something here but here’s hoping someone out there can explain this to me as Freetrade customer service have failed to do so.

Thanks,

Rich

My suspicion would be that it’s 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 I’ve 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 doesn’t charge for trades it was my belief that such business models rely on spreads to make money but executing this order made someone £428 to my detriment.

Freetrade does not even provide information to such spread information in it’s over simplified UI and certainly doesn’t seem to highlight the risks relating to stock liquidity.

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This doesn’t apply in the UK. Freetrade don’t make any money from spreads

Good to know thanks for the info

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 it’s possible if there are literally no higher bids. which could happen with low volume I guess?

It isn’t so much that someone wanted to pay £15, who wouldn’t want to pay £3 less?
it’s 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 I’m 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 don’t 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 shouldn’t 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

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I wonder if liquidity comes in to this currently a share I hold avon protection has a spread of 10%.

No it doesn’t 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 wouldn’t fall that far. That’s why I asked if it was a very low volume stock

Indeed, that’s the process I am currently going through.

I would be very careful of using Freetrade stop loss on an low volume share as this denied me what would have been a nice return.

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I’m 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 doesn’t 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 £17.61 yet I (and I assume most investors) wouldn’t 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 don’t get what they want, yet Freetrade said “Yes here ya go have a bargain”, 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 doesn’t support trailing stop losses and the liquidity risks of particular stocks isn’t apparent to simple investors. I can’t image I’m the only simple investor to be caught on the wrong side of this and feel that Freetrade’s algorithm has cost me financially here.

I would be cautious using a stop loss on any low volume security on any platform unless you’re 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 shouldn’t 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 you’d maybe use for a stock well in ‘profit’ that you’re unsure on the future of or maybe expect volatility and want it to sell at any cost if it ever touches a certain price