Protective Stops

It is very important to have protective stop orders in place to protect yourself from large drawdowns. I don't have any automatic protective stops in place, so I am looking around for options.

DBS Vickers is one lousy broker. When I called them up to enquire about such a feature, the guy answering the phone just bluntly said no such feature, even if I am willing to pay for such feature, there is none. DBS Vickers has been in business for such a long time, yet they don't have something so vital to their customers. Or they simply don't understand the business? Another possible reason is they want to benefit their own remisiers. They want their remisiers to be that 'protective order'. Mmmh, I don't know.

Philips Security offers protective order through a paid service called 'pro trader'. The cost is S$80.00 per quarter (3 months). I think comparing with the potential loss, the S$80 is really nothing. However, their protective order is not fool-proof. You may still end up with big losses.

As I understand from my friend who uses ProTrader, the stop-limit order works this way. For example, if you have sell stop-limit order, the stop price is set to S$0.70, and the limit order is set to S$0.65. If the price drops below S$0.70, the order will be triggered, and your shares will be sold to a price that is higher or equal to S$0.65. If the market price drops below S$0.65, your order will NOT be executed. Philips limits your limit order to be maximum 7 ticks below the last done price. In this case, if your share's price goes into a free fall, say gap down from S$0.72 the previous close, to S$0.55, then you still face a huge loss.

Another disadvantage is you must set your stop-limit orders everyday. It is very inconvenient when you go traveling and don't have internet access through your own computer! ProTrader requires you to download an application to your own notebook computer to work.

CMC Markets has a much more advanced order system. Their orders more or less covers almost all your needs. Then the bad thing is they are not dealing with 'real' stocks, rather they are more in the derivatives business.

Conclusion? Close all your positions before you go for a tour! You can enjoy your life more and you will not risk yourself coming back home to face a huge financial loss.