This is the thing. Your stop loss order was a willingness to sell
You gave an explicit instruction to sell
I do understand your frustration though, and continue to explore with Freetrade the issue around your sell order. But you did create an order to sell, at any cost. So there was a willingness and an intention
What Iâm saying is a buyer canât just put a bid in a ÂŁ15 and trigger your stop loss and buy your shares, unless there are no higher bidders in the market.
The stop loss is there to sell your shares if the price drops below a level. because there were no orders higher than ÂŁ15 the price did drop below that level. If there had been existing orders at ÂŁ18, someone throwing a cheeky bid at ÂŁ15 would not have triggered the stop loss
The fact that it was quite far below your stop loss price is because that was the only available buyer at that moment. this is called slippage.Once triggered It will sell the shares at the best available price, but if no one is willing to pay your price it will go through at the lower price. Some brokers do offer guaranteed stop losses, These guarantee that you will get your price, but usually there is an extra cost to this (eg. a fee) to cover the broker for any losses they make due to slippage. As far as I know the Freetrade ones are not guaranteed
I guess the confusion here is what is meant by price; just because a bidder bids x doesnât make the share worth x does it unless someone is willing to sell at that price and Freetrade effectively said yes Iâm willing to sell but in reality I would not have accepted that trade.
Agree I did have a willingness to sell but it was the situation in which the sale would/should occur that I have a problem with and the fact that it seems to be tied to the mid price rather than the last price. Which for me means the difference between sell if the price (i.e. last price which is all a user of Freetrade sees as far as Iâm aware) reaches this level but it actually meant sell no matter what if there are no bidders bidding above my limit, these to me are very different situations.
A stop loss is used to dump a falling share and get out of the position in order prevent the risk of a loss turning into a much bigger loss. I would suggest not using them in future as it sounds like that is not what you want. for what itâs worth, I donât use stop losses.
Same thing happened to me. Like you, had to raise a ticket and got the screeshot which showed price dropping below stop loss for few miliseconds.
Anyway I was happy with FTâs response.
What is puzzeling is
So I had a stop loss set at ÂŁ17.61 on ÂŁSSLN (IShares Physical Silver) and this triggered at 13:30 on 31/3 despite from what I can see the low for the day being ÂŁ18.42
Why is this low price not reflected in public data ? Even on LSE web site low for the day is shown 18.42. Is this drop in price not considered?
If I understand things more fully now then I believe public data is generally last price and maybe like you I assumed Freetrade stop loss was based on the last price and protected the user to the downside (like a human would do i.e. the share price is falling below X so I think itâs time to get out now).
What it actually means is that I want to sell and as soon as the highest bidder is offering below my stop loss then sell no matter what (I canât be clear if they are using the bidderâs bid price or the mid price (middle of the spread between bid and ask).
These are fundamentally different strategies and the latter requires data which I donât see as available in the public domain (would love to know if such data is available); also no where in Freetradesâ Order Execution policy is there mention of bid, ask and/or mid price yet that is the evidence provided as proof that my order executed correctly.
Once the stop price is met, the stop order becomes a market order and is executed at the next available opportunity.
When the price was met it turned into a normal market order, and sold to the highest bid on the order book at the time. This is standard for how a stop loss works. if you read the article it sounds like what you wanted was a stop limit order ( not sure if these are in freetrade, i never use them?)
I believe stop losses use the bid price as the trigger, as thatâs effectively the best price you can get for selling at that time. but not 100% sure on that, youâd have to ask.
Yes, stop limit is what we assuming going to happen even though FT only offer stop loss. Now we know the difference and FT doesnât have stop limit (yet!).
As far as I know stop limit and stop loss orders are still triggered the same way; the difference being that for a stop loss a market order is generated on trigger but on stop limit a limit order is generated on trigger so the latter guarantees a sell price but does not guarantee a sell and vice versa for a stop loss.
The problem is the ambiguity in what triggers the stop; from Freetradeâs order execution policy:
Triggered Order
A Triggered Order is an instruction to submit:â
a buy order when the observed price during normal market hours falls to or below the Trigger price set by you (a Triggered Buy Order);
a sell order when this observed price rises to or above the Trigger price set by you (a Triggered Sell Order);
or a sell order when this observed price falls to or below the Trigger price set by you (a Triggered Stop Loss Order).
Note the use of observed price as the trigger for the stop; now what does observed price actually mean is the question? It can be reasonably interpreted to mean the price you see in Freetrade i.e. the last price.
Compare this with HLâs statement about stop loss which clearly mentions bid price as the trigger:
Stop loss - An order to sell an existing shareholding which is triggered if the bid price falls to, or below, a price (the stop price) set by you. This could be used when you buy a share to give you some protection and help minimise the loss should the share price fall.
Even Freetradeâs own help articles donât seem to know as shown in this article:
âIf the share price decreases and hits the share value entered, the stop loss will attempt to executeâ - Referring to share price
âA Stop loss is a sell order that allows a customer to limit their losses on an owned investment if the stock price were to decrease.â - Referring again to share price
Actually, it does, at least for that short moment when itâs the sole bidder. Thatâs the core mechanism of how the stock market works, is it not? In extreme cases, with low-volume stocks, it may be just a handful of bidders and sellers, though normally (and ideally) it would be thousands of market participants creating a âbullet-proofâ and indeed a very fair & efficient system, where the thing that happened to you could not happen.
As an aside trading 212 have double stop loss.
Which goes something like this.
Stop loss set at 100p second, but not lower than 95p.
Not used it or tested it just noticed it.
My point was more that there are two parties to a trade and both agree the amount which then imparts a value. A buyer alone doesnât dictate the value same as the seller doesnât.
In terms of my issue having had time to analyse things and collect my thoughts, Iâm more concerned about when the order was triggered i.e. the time at which I became a willing seller at whatever price was being offered.
But the point you seem to be missing is that the order you placed triggered automatically when it went low enough to place it on the market. You were unfortunate that the price offered was even lower than you wanted but thereâs no emotion or mistake in what happened unless youâre saying the data was incorrect and therefore both the conversion of the limit order onto the market and the sale shouldnât have happened?
Sentinelgre
(The Spaniel in my photo is Archie)
39
Unless of course that cheeky buyer is the market makerâŠ
Even the market maker canât just buy anyone share at any price they want if there are existing higher bids. The stock market wouldnât work if they could do that.
They could buy the shares if there were no higher bids though. Potentially if volume was low enough they could drop the price by dumping stocks to trigger people stops, then buy them up. This wouldnât work on high volume stocks though.