Experts on the major markets use the infamous Stop Loss Order – Don’t Make That Mistake!.
In the penny stock markets it is financial suicide to use a Stop Loss Order.
Here is what you don’t realize:
These markets are manipulated. If someone sees that you have a stop loss order it is really nothing other than a “sell order” that will become an active order when the share price hits a certain level. Let’s say you put in your stop loss order at a loss of 40% or so below the current trading price. They know that many people use stop loss orders and , they may just pull the price down and let you sell your shares cheap. Then they take your shares and sell them over time at the current market price. These can be market makers or others that are testing the stock. Sometimes smart traders keep buy orders constantly in at a couple of different firms so they show up through multiple market makers. Then all at once they cancel all orders and see who wants to sell cheap. The price falls and your stop loss order gets executed. Inexperienced traders think the stock is “falling apart” and panic sell at the new lower price. After they get the shares, they raise the price back up.
Sometimes the people pulling the price down are the very market makers and brokers at the firm you deal with. They let you put in a huge stop loss order and greed takes over.
You do realize that when you call in a stop loss order to some penny stock brokers they hang up and laugh? Some look at that as free money, and they make it happen. Yes, it is totally illegal. It is totally immoral, yet they do it.
UP NEXT: MISTAKE NUMBER TWO
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