tag:blogger.com,1999:blog-5465015914589377788.post6912242729410423444..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: The Folly of Stop-Loss OrdersMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-5465015914589377788.post-14415820317203910382008-05-18T10:46:00.000-04:002008-05-18T10:46:00.000-04:00Jim: There is a difference between stop-loss and ...Jim: There is a difference between stop-loss and stop-limit orders as you describe. But if you feel the need to use either one, then you aren't investing properly. It makes no sense to sell an investment because it became cheaper. If you know the value of the company, then you should be interested in buying more when the price drops. Stop-loss and stop-limit orders are mainly for people who buy stock for momentum reasons. Almost all such investors get worse results over the long run than if they had just bought a low-cost broad index ETF.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-78761601040953162602008-05-18T10:36:00.000-04:002008-05-18T10:36:00.000-04:00I think (correct me if I'm wrong) that a stop loss...I think (correct me if I'm wrong) that a stop loss order, when triggered, causes a <I>market</I> sell order to be immediately issued. Some people say that market orders should never be used, they are for suckers only, especially for an illiquid stock (most of them have a huge pile of bids at the 0.01 level, to soak up market sell orders by people that don't know any better). Other people say that stop loss orders have their place, especially in the case when you are on holidays and unavailable to deal with your portfolio.<BR/><BR/>In general, never use a stop-loss order, but instead use a stop-limit order if you really need to backstop yourself when away.<BR/><BR/>http://himmicane.blogspot.comJim Somervillehttps://www.blogger.com/profile/08438509407388777099noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-23960035599215761692008-05-13T01:17:00.000-04:002008-05-13T01:17:00.000-04:00Excellent points. A stop-loss order is basically ...Excellent points. A stop-loss order is basically a "perceived" insurance against mounting loses over (say) 10%, but that only works if the investor withdraws from the market forever. A stop-loss order won't prevent his next investment from losing another 10%.Anonymousnoreply@blogger.com