Nasdaq has just observed (not sure if it is finished yet) a major rotation that led to many stocks to fall (especially tech and "green" ones). As an eToro user, I have noticed that during this period for some positions they did not allow a StopLoss (SL) less than 20%.
This prevented me to reduce the loss for wrongly identifying a resistance (e.g. automatically sell at about -5% instead of about -20%) and led to losses bigger than incurred if I would have been allowed to place the SL the way I wanted.
I have reached out to my account manager and the answer was that this is their policy for some stocks. Also talked to a friend and saw a few presentations about the SL, and limiting the value for SL does not seem to have any sense, at least from the trader's perspective. Basically, the trader should have the freedom to set the SL to whatever value they think fits their strategy.
I am still clueless about the rationale of placing such a restriction. It clearly leads to more loss in periods of big rotations or crisis for some trading strategies.
Question: What is the purpose of placing a minimum value for Stop Loss for some positions (no shorting, no leverage)?