Put SmartStops Protection On Your Stocks
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SmartStops FAQs
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Q:
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What are SmartStops?
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A:
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SmartStops are sell indicators published for each stock every market day. If your stock falls enough to trigger a SmartStop, it is an indication that the stock has an increased risk of further decline and you should consider selling. SmartStops help investors rapidly respond to deteriorating market conditions enabling them to lock in profits, minimize loss and achieve higher total returns.
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What is the difference between a Long Term and a Short Term SmartStop?
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For each stock covered, both a Short Term SmartStop and a Long Term SmartStop are published. Short Term SmartStops are designed for use with stocks that you plan on selling soon and therefore have a short time horizon. Short Term SmartStops track the stock more closely and will trigger sooner. Long Term SmartStops are designed for use with stocks you plan to hold for a longer period of time, typically greater than 6 months. Long Term SmartStops provide more breathing room, keeping you in during minor pullbacks or daily fluctuations but triggering when a more significant downward trend is detected.
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When do I receive SmartStop Trigger Alerts?
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If you are a SmartStops Portfolio Protection Services subscriber, you will be sent an automated QuickAlert email shortly after any of your portfolio stocks fall enough to trigger a SmartStop.
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Are all stocks covered with SmartStops?
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SmartStops are published for U.S. stocks listed on the major exchanges that have average daily trading volumes over 40,000 shares and an average price of at least $5 or more. There also needs to be sufficient price history for us to evaluate the stock’s current behavior. We currently monitor more than 4,000 stocks and ETFs.
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How are stock splits handled?
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The SmartStop that is published on the “Split Payable Date” for use on the “Ex-Date” will be adjusted to reflect the post split stock price.
Example: XYZ stock is splitting 2 for 1 after the market closes on Tuesday.
Tuesday is the Payable Date. The SmartStop published on Tuesday evening for use
on Wednesday, the Ex-Date, will reflect the split and be split adjusted.
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Why does my exit price sometimes move farther away from the stock’s trading price?
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You have observed one of the important features that make the SmartStops strategy so effective. We only want to exit a position when something out of the ordinary occurs, so every day the SmartStops exits are fine tuned to reflect changes in the stock’s behavior. For example, when volatility rises, the stops are deliberately moved further away to keep them outside the expanded range of random normal price movements. If daily price ranges increase we intentionally adjust our exits to keep them from being hit unnecessarily. If the triggers did not expand with increased volatility we would be prematurely exited or “whipsawed” frequently.
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Why does the SmartStops exit-point sometimes move up by a large amount?
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There are two possible causes for a big jump in the exit point. Unlike most exit strategies that slowly trail upward at a steady pace SmartStops exits are formulated to keep a close eye on the acceleration rate of the stock. When the stock price accelerates rapidly the exits will also accelerate rapidly so that greater profits can be locked in.
The other cause of a sudden jump occurs when the SmartStops strategy switches. Remember, SmartStops analyzes a variety of strategies before deploying the most appropriate one based on its proprietary analysis. That way you are assured the correct strategy for current market conditions is always in place.
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Q:
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Do SmartStops change every day?
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SmartStops are recalculated and published at the end of each trading day taking into account the latest market information. The published SmartStop for any given Stock may be the same as the previous day's depending on that Stock's history and trading behavior.
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Do SmartStops cover all stocks?
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No. For our sophisticated analysis to be effective the stock must have a minimum level of price and volume. This minimum price is $5 and the minimum volume is 40,000 shares of average daily volume. Currently we publish SmartStops on over 4,000 stocks and ETFs.
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After I get stopped out, the price of the stock sometimes bounces. Why?
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SmartStops is designed to spot unusual weakness that indicates the stock has entered a down trend. There are often bargain hunters and short sellers that are poised to step into a market and buy (cover shorts) after any unusual weakness. The bargain hunters patiently wait to establish positions on temporary weakness and see these unusual dips as buying opportunities. The short sellers see these unusual declines as an opportunity to buy and cover their short sales at a nice profit. The buying action of these two groups will often create a short-term bounce in prices that makes you wonder if your exit was a good idea. In most cases the bounce will be short-lived and new lows will follow.
However, there are times when the downtrend does not materialize and an uptrend resumes. After exiting a position as a result of a SmartStop being triggered, if it is a core position or one you wish to hold long term, we recommend investors perform their do diligence, review the fundamentals, and make an informed decision regarding re-entry. Smart Stops will soon offer a re-entry alert service to help alert our clients when our analysis indicates that an uptrend has resumed on stocks that formerly triggered a SmartStop.
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My exit was triggered quickly. How do I avoid this?
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Chances are that you bought the stock while it was trending downward and are fortunate to be out. The SmartStops strategies are designed to “cut losses short and let profits run”. To protect capital, SmartStops will be closer when the trend is down and to maximize profits the exit will be farther away when the trend is up. You will find that SmartStops works best when you have purchased a strong stock that is trending upward. If you attempt to buy a stock when the price is dropping you are likely to be stopped out quickly. Fortunately, in most cases this quick exit will save you money and keep you from having an even more painful loss. If you find that you are being stopped out frequently, you may be entering at the wrong time for that stock.
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What happens when a Stock Gaps down further than my SmartStop on open?
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No matter what exit strategy you use, nothing can prevent you from being subject to a gap down. If you had set your contingent order with your broker, than that order will be executed at the best available price at that time. That price could be lower than the SmartStop trigger. The good news is that SmartStops helps ensure you are out of a hard-falling stock, as typically Gaps are indicative of further downward behavior.
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Does SmartStops prevent me from losing my money?
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No. SmartStops does not advise clients on what to buy and can not predict where any particular stock will go. There are a wide variety of factors that can cause a stock to lose value. But by leveraging SmartStops to set contingent sell orders with your online broker, you can rest assured that at least the loss will be limited. Stocks can also “gap down”, and in those situations, your actual exit price may be lower than the triggered conditional SmartStops you placed. We recommend that your contingent exit orders be placed as “market” vs. “limit” orders so that your exit will be implemented regardless of the price. An order to exit at a “limit” price offers no valid protection against a runaway break to the downside.
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How do I set contingent orders with my online broker using SmartStops?
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Simply log on to SMARTSTOPS.net, enter a ticker symbol, and view the current SmartStop for that Stock. New SmartStops are published after the close of each market day and posted around 5:00 PM EST for use in placing next trading-day contingent orders with your broker.<%-- If you select our Broker Integration service, you can designate the recurring contingent orders you would like to have in place and SmartStops will compile updated orders for you each evening and present them to you for approval and electronic submittal to your online broker. Please note, when submitting contingent orders directly with your broker, we recommend that your contingent order be set as a “market” vs. “limit” order. In other words, if stock XYZ hits $$.$$, sell stock XYZ at market price. Click here for instructions on how to do this on some popular online broker’s platforms. Your broker will also have online information. --%> |
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Can I track Options in SmartStops?
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No, but you can track the underlying security in the My Portfolio screen. Because of the wide swing in option prices (due to the pricing including implied volatility), it may be better to set your option exit strategies based on the price of the underlying stock. In a future version, when Auto-Broker Integration is available, a contingent trigger order for an option position can be sent to the broker each night. If the SmartStops price on the underlying stock is hit the following day, the option order would be triggered to sell. That order would then close the option position at the option market price.
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Do I really need to review my SmartStops Daily Email?
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No. If you are a Portfolio Protection Services subscriber, SmartStops monitors your portfolio each day and sends an alert email when any of your positions trigger a SmartStop. Once alerted, you can make a decision to sell or hold. SmartStop users taking advantage of our broker integration service can have contingent orders in place with their broker and have them automatically updated each day to reflect the latest published SmartStops. If you are a SmartStops user but your broker is not yet a member of our broker integration offering you will need to review the newly published SmartStops each market day and manually update your contingent orders with your broker.
Information and consistency is key to maintaining effective downside protection. We recommend users review their SmartStops daily emails and the status of their portfolio positions.
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Can I get real-time alerts?
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Yes. If you are a Portfolio Protection Services subscriber, your SmartStop portfolio will be continually monitored. If any of your positions fall enough to trigger a SmartStop, a SmartStop QuickAlert will be emailed to you notifying you of the SmartStop trigger event.
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