Brokers And Service Providers | New To Trading - Trailing Stop Loss (Barclays Smart Investor Specific)

16th Aug '18 by nathanwynne

11 comments 6317 reads

Hi All,

Sorry for the newbie question - very new to this and have only been trading for a couple of months with a semi-success rate.

My question is Barclays specific. As I have been reading and learning more I have come to the conclusion that I would like to start playing with Trailing Stops as a form of protection. I understand their principle but am extremely confused on how to implement them using the online broker that I do - I was just wondering if anyone else was using the Barclays Smart Investor platform and could explain how to apply them in laymen terms.

The options they offer are a 'Min Value', 'Max Value' and 'Expiry Date'. If for example, I had some shares that I purchased for 70p per share and were now at 100p per share - how do I set up a Trailing Stop for say 80p regarding the 'Min' and 'Max' values? Would I also take it that the trail remains at 20p trailing difference should the share rise to 120p or does it maintain a percent difference?

Once again, apologies for the newbie question but I figured that asking here might also benefit someone else in the future and offer a more straightforward and understandable answer than Barclays support will be able too - sadly their documentation on the website is also pretty non-existent as well.

Thanks in advance,

Nathan.

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john2

16th Aug '18

I'm not familiar with how the Barclay's account works, so I won't comment on that. However, I would urge you to be cautious when thinking about applying stop losses via a broker. The problem is that share prices sometimes gyrate wildly as the market opens, so that your shares go below the stop loss at opening time then ten minutes later they have recovered to their original level. I did try applying stop losses via a broker at one time, but gave up after I repurchased shares which had only been below the stop loss for a minute or two.

tony777x

it is true that stop losses can take you out. I would add that this does vary with the general volatility of the share. Less liquid shares seem to be more prone to this . Having said that using stop losses for me has benefited more times than not.

andrea34

17th Aug '18

I monitor all my stop losses on a spreadsheet, the formula is easy enough to implement though I guess you do have to keep an eye on the highest the share price reaches on a regular basis.

Regardless of how you do it, note that it is not generally regarded that the same stop loss percentage should apply to every company (maybe you already knew this). Stop loss percentages would typically vary according to volatility and risk profile, so for example you might have a stop loss of 10% for a FTSE-100 company but for a company flagged as adventurous with a higher risk profile s stop loss of 15-20% would be more appropriate.

Hope this helps.

Nick Ray

The options they offer are a 'Min Value', 'Max Value' and 'Expiry Date'.

This sounds like a combined limit-sell and stop-loss order. Sometimes called "target setting".

Trailing stops are sometimes called "price locking" so see if you can find an option with that name.

Almost always the trailing stop uses a fixed number of pence below the highest price seen rather than a percentage. So you have to calculate a suitable value and then adjust it occasionally to keep it the right distance away.

Someone mentioned that prices can be very unstable in the first ten minutes of trading. But in my experience most trading platforms allow for this and do not apply any stop-loss you set until about ten minutes after opening. You can often see this effect on a stock which has released a poor RNS. It will drift lower in the first ten minutes and then drop more quickly as all the stop-losses kick in. Then about 9:30am with no more stop-losses left to trigger it climbs back up again!

martin576

What I have found useful is the alert system here on Stockopedia. You can set a price for a stock and it will then automatically email you when it has reached it. Then you can make a decision about whether to buy or sell. Of course that may allow your emotions to then interfere with a decision....

galfers

26th Aug '19

Did you ever get an answer to your question? Would be interested myself.

William K

I can't answer your question specifically about stop losses with Barclays but there is a paper by Snorrason and Yusupov (2009) suggesting that the best performing trailing stop loss should be set at 20% to allow retracements. See: https://lup.lub.lu.se/student-...

There is a good article on stop losses in this week's Investors Chronicle by Michael Taylor (23-29th August 2019).

Macro

Nathan,
The quick answer is that yes you can implement trailing stops from within your Barclays account. Simply go to the account (ISA account or Investment Account) where the stock is held and place an order for that stock, and select trailing as the order type. You cannot sell a stock you do not own with Barclays (i.e. you cannot sell short).
The other caveat with Barclays is that you cannot have a trailing stop on a stock listed in a foreign currency - so if you have any ETFs that are listed on the London Exchange, but the listing currency is in EUR or USD then you are not allowed to implment a trailing stop as the system cannot cope with the currency variation.
In terms of how you manage stops you need to be careful with taking advice from others. The first step is to recognise that you need to have an over-ride on positions based upon your personal risk tolerance. Some friends have a per-position risk limit of 2% of their total portfolio. I don't! My risk limit is 0.5% of my total portfolio, per position. That over-ride is then complemented by the individual, dynamic stop. Some will advocate wide stops on individual stocks (between 15% - 20%) and narrower stops on collective investments such as ETFs/Investment Trusts (between 7% and 15%). But this assumes that you are working on the same investment time horizon as the person you are taking advice from! You might be speaking to a day / swing trader who is using technical setups to enter a trade where entry is close to a technical support level - and so they have very narrow stops. So, you need to know what your style of working is - and that of the person you are speaking to. Then there is the whole argument about stop-searching algorithms run by market makers - and whether (especially in thin markets in late July & August, or in small caps / thinly traded stocks) you should place your stop as an order onto the order book at all. If it is small caps that interst you, then it would be worthwhile familiarising yourself with how the order book works before proceeding! Remember: You are placing an order, and if the order book empties out in thin trade then you might inadvertendly have your stop much closer to 'par' than you had ever thought. When this happens the price dips to take out your stop, and then bounces back - leaving you 'robbed' of your investment and feeling hard done by to say the least!

A worked example:

Say your portfolio is £100,000 and you have a personal risk tolerance of 0.5% of the portfolio value per position. The "Max Risk" per position is therefore: £500.

Say you have a position that you open and the position size is £10,000.

If this was a typical ordinary share this might warrant a stop of around 15-20% - i.e. £1,500 to £2,000 - which is more than your Max Risk! That means that your position size for that type of investment is too high for your risk tolerance.

If this was a collective investment such as an ETF / Investment trust a stop of around 7.5-15% might be appropriate - i.e. £750 - £1,500. That means that your position size for that type of investment is too high for your risk tolerance.

So, lets try again with a position size of £5,000 with a 10% stop on a collective investment. Your risk on that position is £500; and your Max Risk limit is £500. You then need to work out the 'Trail' - which is expressed in pence per share. So, you turn whatever is smaller of Risk or MaxRisk into a pence per share value and that becomes the Trail that you programme into the Barclays order.

Now, if your porfolio as a whole goes down, and your Max Risk stays the same (as a %) then you need to re-programme your Trails. Many people do this weekly, and keep a spreadsheet to do the calculations for you. Hint: Use Microsoft Excel, and the Stock price lookup functionality to help you to do this automatically.

Conversely, if the position in question is a winner and it rises quickly and faster than the overall portfolio size then you can find that you are constrained by your MaxRisk limit. This indicated that you need to trim the size of your position, or narrow your stop.

Gromley

Neil66 wrote :

In terms of how you manage stops you need to be careful with taking advice from others.

To try to be somewhat "down with the kids" - THIS! JUST THIS! (Or in C.20 parlance - I totally concur.)

There are many considerations I think when considering an appropriate level of stop loss.

Nathan talks about being "new to trading".

"Trading" is not really a closely defined term. I used to refer to myself as a "value trader", by which I meant that at the time I was buying stocks that I considered "value situations" and selling them when I considered the value had been "outed" . My theoretical holding time was actually up to 5 years, but someone challenged my description because they thought it implied a holding time measured in days.

However if by "trading", Nathan is talking about a model perhaps akin to Mark Minervini then that is a different proposition.

For Minervini, the timescales are quite short and the focus is on perhaps achieving a relatively low 'strike rate' in terms of proportion of winners, but a substantial asymmetry between very small loses on the loosing trades compared with big gains on the winning trades. Stop losses are very import here therefore,

My strategy was (still is, although I have perhaps become more 'hybrid') to get a high 'strike rate' over a longer holding period and hence I was/am more tolerant of pull-backs (some of which may recover and some of which may lead to much bigger losses).

I have done quite a bit of research in to the "types of portfolios I might hold" (NAPS being quite a close public parallel) .

All of my findings so far point to the fact that there is no level of stop loss that is more profitable than having no stop loss - for this type of portfolio. Although stops in the region of 15-25% have generally not performed much worse than having no stop loss at all - and they did give a degree of "emotional security".

So personally I do not generally use stop losses as such. Except for what I call my "Armageddon stops" - Spread-betting companies allow you to set "Guaranteed Stop Losses" which in return for a premium will sell at a guaranteed price even if the market price gaps below this - so I do deploy some stops that protect me (somewhat) against massive gaps down on "black swan" types of news.

I have strayed off-topic here [but I didn't start it :-) ] and I'm afraid I cannot answer what was the original question - except to say perhaps asking Barclays themselves might be the answer. In fact asking them at least twice might not be a bad idea, as my experience of call centre staff (not specifically Barlacys) is that some are prepared to offer a categoric answer - even if they have not actually got the first clue what they are talking about.

Steel Monkey

23rd Apr '22

hi Nathan, did you get an answer to your question? Even i want to know what to the Min and Max mean on a Trailing Stop Loss (TSL) Order for Sell in Barclays Smart Investor. I know what a TSL is, just need to know how it works on the Barclays platform. Thanks in advance, Satishan

New to trading - Trailing Stop Loss (Barclays Smart Investor Specific)

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Nathanwynne

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