S&C Magazine Current Contents Q & A Aspects Of Trading STOP ORDERS: A CONVERSATION
STOP ORDERS: A CONVERSATION
- Details
- Parent Category: Q & A
- Category: Aspects Of Trading
- Written by Don Bright
Who are the “they” who can see stop orders? I read a lot of comments about how “they” run your stops. I’ve always been curious about the dynamics behind this belief. I understand there are certain key price levels at which a large collection of stop orders are likely to be sitting (stop-loss orders for countertrend traders and orders to initiate or add to positions for trend-followers), and a party desiring to execute a large order to sell into strength or buy into weakness would do well to take advantage of the liquidity offered by all those stop orders turning into market orders.— NoDoji
DB: I suppose “they” would apply to the New York specialists for some of these orders. I say “some” because there are various ways to input stop orders. For hard stops on the Nyse, specialists are responsible, since they are subject to tight guidelines on how they execute and cannot summarily execute them at their own discretion.
Is there a high-level order book subscription available that allows them to see the market depth of stop orders instead of just the limit orders? Or do only brokers, pit traders, and exchanges have this information?
DB: I made calls and was told there is no paid-for access available.
Or is it simply a matter of savvy traders assuming certain levels will have a large number of stops taking advantage of liquidity to buy weakness/sell strength (or in a strong trend breakout/coiled spring situation, pulling bids/offers, resulting in a significant price gap and bad slippage for those whose stops are triggered)?
DB: I know that savvy traders could read a tape well and certainly have an educated guess where stops might be located.
Finally, what about hidden orders? My broker has a hidden stop option you can select when a stop order is placed. Is this hidden from everyone? If so, wouldn’t all these paranoid traders posting online use hidden stop orders to prevent “them” from seeing the orders?
DB: You may be referring to stop orders held by the brokerages, not submitted hard stops held at the exchange. The responsibility falls to the brokerages holding the orders. I don’t use stop orders, I prefer to use alerts, so I can review all market conditions before executing a trade.
