Stop Loss Orders... not in Canada Eh? Pity.

Well, unlike the tea that is only available in Canada stop loss orders are not.

I thought I had everything nailed down and here comes a rather large issue that I had not expected. I have talked to people over the last year and change and the topic of stop loss orders had been talked about but I guess nobody knew that they didn't exist...go figure.

With Questrade I was told to set a stop order that I had to enter a limit price at the same price as the stop price...without clarification. I have used them often and had very good success doing so, stops were hit and positions closed very close to my stop price, sometimes higher (or lower for short positions).

I had noticed the odd stop that was triggered and was subsequently cancelled by he ECN, infrequent enough that I was not overly concerned about it. Not a major concern.

Lately I have had a number of stops not get triggered. I happened to be watching one as the price headed down past my stop and I ended up cancelling the order, which I should not have been able to do once the price triggered the stop, and just exiting manually. I chalked it up to a glitch. So it happened again and I decided to hold it and see exactly what would happen as I really didn't expect the price to keep going down...the order was not triggered until the price came back up to the stop price... basically it became a limit sell order as the price passed it on the way down and sold once the price met it on the way back up.

So, ever the curious one I contacted Questrade and asked about these orders, was told that what I was doing was right and they explained that they are a limit order...but I didn't want a stop limit order. "Oh, just hit the market order box". Trading was done for the day, (Thursday), so I tried it yesterday.

Market stop order does not work. Yesterday I got a CSR that knew what to look for... He recognized that I was trading on the TSX... The TSX does not support stop market orders.

HUH?

That was basically what I said...although I was online chatting so it didn't come across that way.

Apparently it is a Canadian trading rule and has nothing to do with my broker. I emailed the TSX bunch and got the same answer.

So, I cannot rely on a stop to work the way I thought they were. I will still use them but need to set alerts to tell me when a price is getting close to my stop so I can manage the trade closer, that was not my goal as I wanted to be able to walk away from a trade once it got to a certain point with the knowledge that once the price I set was breached, no matter what, I would be out of the trade.

Today I spent a few minutes checking out other avenues of trading to allow for stops. The main one is to trade NYSE issues instead, perhaps emini futures or forex. If I was trading full time I would not be as concerned about this but I do not want to have to babysit trades once I get into trading longer term timeframes. I can easily just trade NYSE issues that are TSX counterparts, stocks traded on both exchanges, as they track each other easily and are represented on the indices that I am familiar with but I think the best bet is to end up trading US exchanges exclusively.

Most of my trading right now is in my RRSP account so there are no US tax implications, just exchange rates for currency most likely. The TFSA is not so lucky but at least there are no CDN tax issues there.

What to do.

Back to the regular stuff for now I guess. My alert volume is turned up a bit higher now.

Jeff.