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I just set a trailing stop loss on some stock I had before the correction we are going through right now for 10% below the bidding price. This means at $39.70, the stop loss should have been triggered and turned into a market order. However, the stocks actually sold at around $41. Is this due to the delay between when the market order was set and when the stock was actually sold? Is it common to be so different? I thought setting a trailing stop for the bidding price meant that when triggered, there was already someone willing to buy the stock at that price so it should be sold at that number (or very close to it at the very least). My guess is setting it for the asking price will likely cause the stock to be sold at a lower price than you specified because the actual price people are willing to buy the stock for will likely be lower than the asking price. Is this correct?

Thanks!

Paul

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There could be a number of reasons:

  • The price hit your number ($39.70) but by the time your order hit the market, the price had gone up.

  • Perhaps the stock went up between when you placed the stop loss and when the order was executed. A trailing stop loss will ratchet up:

Very simply, the trailing stop maintains a stop-loss order at a precise percentage below the market price (or above, in the case of a short position). The stop-loss order is adjusted continually based on fluctuations in the market price, always maintaining the same percentage below (or above) the market price.

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    The first one is the most likely one, I've had this a few times. It's annoying but well, unless you become one of the flash boy's you'll have to live with it. – reaper_unique Aug 26 '15 at 6:42
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Is this due to the delay?

Yes, but the delay is caused by your broker and its affiliates.

Trailing Stop Order is not exchange native, meaning that the broker is responsible for keeping track of whether the stop price has been reached, and the broker is responsible for sending the subsequent Market Order to the exchange.

For certain exchange, even Stop Order or Stop Limit Order is not exchange native.

Is it common to be so different?

No, only in times of extreme volatility.

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