Excusing my ignorance of the law for a moment... a stop loss in my opinion is just as good a trade as someone that sold at market.
The stop loss is certainly used to reduce risk... but in my opinion, if someone was using a stop loss and got out at 100 or 90 or 85, then they are risk averse and it did its job... got them out with limited downside. While the end result wasn't great in that it recouped it's losses, it could've been very possible that the stock news was legit and emlx ended up at 30.
In a nutshell, in the above case, while a shareholder may feel wronged, they got out with minimal damage and would probably use stop losses in the future.
Now onto the people with the stop losses at 60 and 50 and 45... these people don't understand the concept of stop losses.
Thinking about this for a minute, the purpose of stop losses is to move them up as a stock goes up to protect gains in the event a stock sells off. Now if someone bought EMLX at 45 and put a stop loss in at 45, watched it run to 110 and didn't move the stop loss, then they deserved the fill when the stock cratered. It defeats the purpose of using stop losses if you don't move them up (I'm not saying do it every day, but maybe once a week if you're in something like emlx)
The prudent thing in this would've been for those that bought at 45 to move their stop losses up as the stock trended higher.
The bottom line in stop losses, is that those that use them, are using them to protect gains and understand the risk with using them (hey, big swings are part of the game, so sometimes a stock will take out a stop loss intraday before moving higher... and that's why I don't use them [at least not often]).
And as I eluded to earlier, there is no excuse for having stop losses in on EMLX at anything below 70 (let alone 80)... because what's the purpose at that point?
That's why when you monitor a daytraders calls.. particularly an active trader.. as a stock moves up, you see them saying "moving stops up on XYZ to 40 from 37), etc... they don't just let a stock go up, come back down, and then go "oh well, I'm gonna get out here breakeven."
So for those that got stopped out in say the 80s or higher, then the type of order did its job... regardless of the circumstances (unfortunately a hoax).
Regards,
Jason |
