My buddy's tale of woe on Freaky Thursday (stop losses):

[trof]

He has stop losses on all his stocks.
One is an ETF that performs inversely to the market.
Market goes up, the ETF goes down, and vice versa.

Well, it didn't work in the mass confusion Thursday.
The ETF plummeted right along with the market.
He was stopped out for a $5000 loss.
But the drop was only momentary and the ETF soon zoomed back up.
And since he had already sold all his shares, he missed out on a $3000 profit.
:-(

Wonder how many millions of investors were burned by stop losses?

[Warpy]

1. Probably a lot of them

which is why they're a really bad idea.

If you don't have the time to sit staring at a couple of screens all day and follow trades minute to minute, the best idea is to go long, period, do your homework, and prune the portfolio once a year when you sit down with a green eyeshade on to do your taxes and are already in that accountant's mode.

That was my dad's strategy and I've adopted it, too. So far, it's worked. It might stop working at some point, but nothing will work at that point.

[DrDan]

2. I agree completely with that strategy

patience patience patience - don't panic or try to time the market.

[Frances]

3. Fidelity is my brokerage

When I went there today, Fidelity had a message in bright red letters to the effect that some trades were clearly erroneous and that Fidelity is investigating them. I assume Fidelity was referring to stop loss trades.

[Statistical]

5. Not all trades though.

Only about 240 stocks and only those orders that executed 60% below pre crash market price.

If his ETF wasn't one of those on the list they won't be busted.
IF his ETF was on the list but his stop was less than 60% drop they won't be busted.

:(

[Statistical]

4. That is a reason I don't use stop losses.

You can easily get stopped out even in a less chaotic market.

If you really need protection watch the VIX and when volatility is low buy a put at your limit.

i.e
Have 100 shares of ETF xyz trading at $72. Don't want to take more than a 10% slide. Buy an put w/ strike of $65. Now you will pay a premium for that put but it sure beats getting stopped out.

[zbdent]

6. what I wonder is this ...

how many "short sell" orders (however you refer to them) were placed before the "fat fingered keystroke" ...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x78635

[nilram]

7. google "stop limit" orders

One of my stock friends mentioned them at our regular lunch. I don't use them (yet) so I don't want to explain them, but they sound useful in this situation.

[sendero]

8. The stop market is for suckers..

... that didn't learn anything in 2000 or 2008. It's not a market where you can invest in the value of good companies, it is a controlled casino where you will only make money if you happen to accidentally hold positions that are going up as part of the scam instead of down.

[dkf]

9. Or what happens if you were able to buy at a freaky price turned around and sold it and then they

Busted your original buy trade? All of a sudden you are short in a market that explodes upwards. Yikes.