OK, so this really pisses me off. I put a trailing stop in to protect my profits in a stock I have just bought at a good price, which is going up. My trailing stop is about the same as the largest trading range within the last five days , so in theory it is a safe and realistic amount for a trailing stop.
What happens: Even though the stock never trades in the open market session down to my trailing stop price, my trailing stop still gets triggered.
Confused? I was, so I called TDAmeritrade to find out what is going on. They said that the trailing stop is triggered by the bid price in the closed session. So the stock doesn't even need to trade at that price - just some broker needs to bid that price in the quiet after hours.
My intepretation: A TDAmeritrade market maker puts in a low-ball bid in the closed session, knowing that a bunch of realistically set trailing stops put in by amateurs like me will get conveniently triggered and taken out of the market as soon as the market opens. Lots of commission for TDAmeritrade brokers, lots of lost profits for retail investors.
Solution: I conclude the game is rigged against stop losses and trailing stops. The only way to get around this is what TDAmeritrade calls a trigger, which you can specify to only trigger if the last sale is a certain amount, rather than the bid price, which they give you no choice about using for a trailing stop or stop loss.
Footnote: This never occured to me at Charles Schwab where I set a lot of trailing stops and never got taken out by an after-market bid. This is the third time something similar has happened at TD Ameritrade, I will have to check the exact prices to see what happened on the other occasions, but that's a downgrade for TDAmeritrade from my perspective.
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