Do Institutional Investors Use A Stop Loss?

Question

Can/do Institutional Investors get stopped out when a stock drops sometimes?

Answer 1

I've spent 20 years in working for brokers who cater to institutions. I doubt that stop loss orders constitute more than 1/100 of 1% of the orders processed. In fact, very frew institutional orders are limit orders. The overwhelming majority are straight market orders.

The reasons are varied:

1) Institutional orders are often large, and there is tremendous risk in letting the market automatically sweep a large position.

2) There are more intelligent and appropriate mechanisms available to institutions for automating block trades, including direct exchange access, ECN access, Autex indications of interest, and Posit.

3) Intitutional positions are actively managed both on the buy desk and the sell desk. There is never a moment when there aren't eyes on the positions, open trades, and the market.

4) Placing a limit or stop can compromise annonymity.

5) Automatic trading strategies can be triggered through the institution's own trading software. This keeps the trading strategy "in house", and avoids tipping the specialist.

Answer 2

It all depends on their investment strategy. For example, if the investment bank managing a fund is certain that a stock will not drop and should go up, they will place a stop loss to limit if there are sudden changes in the stock going down. Also, if the stock goes down too far for the liking of the strategy, eg usually there is a trailing stop of 2-3%, or 3-4% of the initial investment, then the stock will also will be sold to minimise the losses. It's not good to hang onto a stock which is going down hard, no point unless you know it is volatile and certain that will go up in short term.

Answer 3

there's a extensive enormous distinction between all of them. i might do a seek for on line. i for my area in worry-loose words use shrink orders. I desire i had end-loss shrink orders set for the decrease back crash we had from the Dow 12k+ on a similar time as i grew to grow to be determining to purchase long. enable's assume: no would desire to speed and rush the order, a $2 inventory won't leap to 3 different than their is a buyout or loopy spikes in quantity. A shrink sell order will sell at $3 or above. A end sell order might kick in as rapidly via fact it dumps shrink than a million.50. regrettably, this order is ineffective at your fee if the corporate has extensive volatility after hours or pre-marketplace and the fee somewhat fluctuates shrink than your a million.50. A shrink sell order, might kick in as rapidly as your maintain practices hit a undeniable quantity, and you will possibly have your shrink type set shrink than your end and it might in worry-loose words sell at that quantity or simpler. i might additionally propose an all or none order, so which you are not getting hit with different commissions on a single order.