Does a stop loss work outside of market hours?
A short answer is no (below I explain why). But there are ways around it (below I explain how).
A classic stop loss (=if triggered sell immediately for any price) doesn’t work outside of market hours (4AM to 9:30AM and 4:00PM to 8:00PM) because it triggers market order and only limit orders are permitted outside of market hours due to wide bid/ask spreads.
The solution would be a conditional order (not all brokers offer it, I trade with Moomoo)
Example.
Need to set a stop loss of $110 for my 10 shares of AAPL that will work outside of market hours as long as I’m holding the position.
Go to Conditional orders. “If falls to $110, sell at limit price of $108 (allowing $2 slippage: it will sell for the best price available not lower than $108, but if there are no buyers for $108 and higher it wouldn’t sell then; if you need to sell for any price, put $1 then), 10 shares, 30 days expiration (can chose: today, tomorrow, 1 week, 2 weeks, 30 days), allow to fill outside of market hours.
A classic stop loss (=if triggered sell immediately for any price) doesn’t work outside of market hours (4AM to 9:30AM and 4:00PM to 8:00PM) because it triggers market order and only limit orders are permitted outside of market hours due to wide bid/ask spreads.
The solution would be a conditional order (not all brokers offer it, I trade with Moomoo)
Example.
Need to set a stop loss of $110 for my 10 shares of AAPL that will work outside of market hours as long as I’m holding the position.
Go to Conditional orders. “If falls to $110, sell at limit price of $108 (allowing $2 slippage: it will sell for the best price available not lower than $108, but if there are no buyers for $108 and higher it wouldn’t sell then; if you need to sell for any price, put $1 then), 10 shares, 30 days expiration (can chose: today, tomorrow, 1 week, 2 weeks, 30 days), allow to fill outside of market hours.
It might happen that you close your position before this conditional order expires and in that case it will open a short position for you if AAPL falls to/below $110. To prevent that from happening, there is one more setting on the bottom: Short: Not allowed
If you are just making first steps in trading, I wrote an article “How I learned how to trade” https://link.medium.com/4xoIMGE2Gbb . I started trading a little over a year ago. See if you could benefit from my experience. Good luck with your journey.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Kittykiki : WOW Thx for your sharing
Knulp : Great tutorial! I have never found the tips of placing stop loss in PM and AH. The conditional order in your example is trailing stop loss and honestly I don''t know how to use it well besides it can be used in extended hours to stop loss. Would like to learn more tips of using trailling stop. Again thanks for the great info
insider trackerrr : Good read.
Olaf Michelson : Blah
Popular on moomoo : Hi there, thank you for your high-quality contribution
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Ilona : Fantastic. Thanks for sharing your experience with us！Its very informative.
OldNormanBates : Very nice information. Thanks for sharing. Glad You Got Tagged for Sharing Wider to the Moomoo Community News
Allen : So much thanks for posting the tips for trading outside market hours. Im always puzzled with types of orders.
finance_analystOP Knulp: Hi Knulp. Thank you. However, it’s not the trailing stop loss, but the fixed stop loss. I will write another article explaining the difference between the two and when each one of them is used. Long story short, fixed stop is “sell if price drops below $110” and trailing stop is “sell if price drops by $5”
finance_analystOP Popular on moomoo: Thank you very much for recommending my content. I will write more articles for the benefit of Moomoo community!
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