Whats the best way out of a tanking position?

Two options that work for me:

If liquidity is thin, I usually just opt for market out since I will not be able to find much liquidity to get my orders out ahead of other orders who are also in some kind of panic mode.

If liquidity is pretty good, I don't mind waiting for a pivot to sell into a bounce. The caveat I face is that the pivot is worse than what a market order would have given me, but who can know the future. Point is that with more liquidity, I can find levels that might offer better exits and attack those levels with my orders. Routes used are arbitrary...the smart routes are all pretty much doing same things nowadays so it's important to find thick levels off pivots that would offer the better exit.

Two last points:

Faster selling is usually the panic mode of everyone else. Classic tape reading capitulation setup..instead of eating the loss "at any price", there is usually a snap back reversal in the cards..where buyers are easier to sell to than sellers. If you have the stomach for it and can wait for this snap back..you will be able to exit easier at a price you see for liquidity, rather than handing it over to the market.

Second and this is the biggest point of it all...one ugly trade against you doesn't matter..or shouldn't, in terms of an overall trading plan. The risk on the stock should have been in risk parameters set forth by the trading plan. It's "average" loss over a series of X number of trades that matters. Assuming you aren't a constant stop blower or that you constantly trade stocks out of your realm of execution abilities and this is just "one of those trades", then the importance of this ugliness won't matter in the overall strategy. JCOM was the last one to bite me in early September on a failed capitulation setup. Sure it eats into your profit pool, but overall it doesn't destroy my system.

I guess I'm tying the "how to get out" with the "don't worry much about how" as this one trade shouldn't matter overall. As for practicalities, my above explanations works best for me as it relates to liquidity of the stock.

Chris
 
Now here are some examples of good answers to a question.

I appreicate all the advice so far. Will start playing around with crossing ecns and market orders the rest of the week to get a better idea how they fill.

Do you gentlemen use market orders for covering positions that are ripping up as well? Or is that a different senario that would be better with limit orders.

I will be looking into the snap back idea.. never thought of holding it for a snap back always was taught to cut them loose, but if I can get out at a better price in most cases this would be something to look into.
 
Quote from ChaosNSX:

never thought of holding it for a snap back always was taught to cut them loose, but if I can get out at a better price in most cases this would be something to look into.
More...
You may develop a sense for the stock you trade, insofar as being able to tell if the drop is an over-reaction which may give you the idea to stay put until others bid it back up somewhat. That wouldn't be a progressive selloff, but a spike.
 
Ok, here is my 2 cents.

Before you put on any trade, you MUST have a protective STOP in place.

Every trade needs a RISK/REWARD ratio calculated before you even THINK of putting on the trade. So you must be sure of how much you will risk if the trade goes against you.

I am not yelling at you.

It is like jumping without a net.:eek:
 
xxxxx Moderator Edits

2. Who said anything about it always being a loss. Say a trade does not hit a risk reward target and starts to tank south, you want to get out with as much as you can get ASAP.

xxxx Moderator Edits

(Moderator: ChaosNX, I've taken these out as the previous post was deleted. This is a good topic you have started, and I'm trying to keep it focused...)
 
Ok, what do you do if it does not hit your target and starts to tank?

Put you order for inside the bid or ask. That way you may lose a little, but you should not lose a lot. I would suggest at all times having "market depth" open so you know how much you can fill at each price and put it at the lesser one. With futures this is one tick. With stocks, it is a percentage.....on a cheap stock 10 cents....on a more expensive one a dollar.....you get the picture.

You can directly program this into your order setup. It is under improving the market.

Entering market orders is ok for a panic. Not good for general practice.
 
Place a limit order a fair but not stupid amount beyond the bid or offer. This gets you out quick without risking a terrible fill. The exception is major spikes on surprise news etc where you should just get out at the market.
 
Quote from LongShot:



dump it you idiot duh
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"pspr; sell"



It really is just that simple. If it isn't going your way get out!
Don't hope, don't pray, don't cry, just get out! If it is not looking
the way you expected it to, dump it now, at market.
 
Quote from chasmann:



"pspr; sell"



It really is just that simple. If it isn't going your way get out!
Don't hope, don't pray, don't cry, just get out! If it is not looking
the way you expected it to, dump it now, at market.
More...



must have exit strategy prior to trade execution!

unfortunately that would be poor trading. :(
if one lacks the appropriate prepartion before hand you are merely reacting to noise and random volatility.
price movement can not be predicted but rather planned for and thus predetermined by planning ones escape rout prior to trade execution.

be smart. trade better.make money.
 
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