TimothyMoulder
Member
I thought I'd mention this errant thought since we have a number of fiscally-oriented people here.
The worst thing that can happen to a stock is a run on the bank - people panicking over something and cashing in their chips in huge numbers. The stock falls in value, which triggers more people to dump it, and so on.
However, in the "old days", the inconvenience of the times - banker's hours, limited ability to reach the broker, etc - tended to slow the damage a little, and help prevent out-and-out crashes of a particular stock. Companies had some room to react, release statementsm and otherwise perform damage control.
In the modern day-trading world, people use their Ameritrade accounts like credit lines at the casino. And they use a tool called a trailing stop to try and avoid losing money. Basically, ANY downturn in the stock (to a set amount, or any drop at all) triggers a computerized dump of the stock.
Now, even a small hiccup in a stock's performance can cause a major drop in it's stock value, since every penny it falls can trigger a computerised cascade of dumping and even further collapse.
This phenomenon has even caused the stock market to shut down on a couple of occasions, because the values of all kinds of stocks were in free-fall, and the only way to stop the dumping was to stop the market altogether.
So my question is this - are we getting a little TOO convenient? Is it really a good idea for the economy and society to let indiscriminate tools like trailing stops exist? Or if you pays your money and takes your chances, shouldn't you have to stand until the roulette wheel stops spinning?
TM
The worst thing that can happen to a stock is a run on the bank - people panicking over something and cashing in their chips in huge numbers. The stock falls in value, which triggers more people to dump it, and so on.
However, in the "old days", the inconvenience of the times - banker's hours, limited ability to reach the broker, etc - tended to slow the damage a little, and help prevent out-and-out crashes of a particular stock. Companies had some room to react, release statementsm and otherwise perform damage control.
In the modern day-trading world, people use their Ameritrade accounts like credit lines at the casino. And they use a tool called a trailing stop to try and avoid losing money. Basically, ANY downturn in the stock (to a set amount, or any drop at all) triggers a computerized dump of the stock.
Now, even a small hiccup in a stock's performance can cause a major drop in it's stock value, since every penny it falls can trigger a computerised cascade of dumping and even further collapse.
This phenomenon has even caused the stock market to shut down on a couple of occasions, because the values of all kinds of stocks were in free-fall, and the only way to stop the dumping was to stop the market altogether.
So my question is this - are we getting a little TOO convenient? Is it really a good idea for the economy and society to let indiscriminate tools like trailing stops exist? Or if you pays your money and takes your chances, shouldn't you have to stand until the roulette wheel stops spinning?
TM