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Technical Analysis Frequently Asked Questions

Can the market maker see a trailing stop order?

How often does a trailing stop adjust?

Can the market maker see a trailing stop order?

The market maker can see all orders that are outstanding including trailing stops. Any order entered into a trading system is visible to the market maker. If your stock has a market maker, he/she can see all orders. While they are not supposed to do this often the market maker will "help" the market take out your stop before it moves back up. They might need additional shares to sell at a higher price, so they will encourage the market to fall to execute stop orders that are very close to the current trading price.

Not all market makers will act in this way. However, enough stops seem to be executed just before the stock rebounds, that many traders believe this to be true. that is why investors often keep a mental stop and only enter it when the stop price has been hit. This requires strong discipline on the part of the trader. It can be tempting to keep holding onto the stock hoping it will rebound. Other traders place their stop sufficiently below the support levels, believing they are slightly below the other stops. that way they will not be "taken out" on a brief drop, yet they have a stop in place to protect their capital.

How often does a trailing stop adjust?

For a trailing stop on a stock or ETF that you are long, moves with each up tick based on the factor you set to establish the stop. A tick is the move a security makes on each sale. This can be a specific number of points or a percent. Should the stock tick down, the trailing stop holds at its most recent level. Should the stock price fall to the trailing stop's level it triggers a sell order.

A trailing stop on a stock or ETF you sold short works the same way, expect the stop moves down with each tick.


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