Stop Loss for ISA account

The ability to set an automatic stop loss would be great to help protect against sudden market drops.

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Stop loss is a trading tool and has no real place in an ISA which is for investments of mid- long-term.

Why do you need a stoploss? Even then it’s a pretty horrid feature even in trading.

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I disagree that a stop loss is wrong for ISAs or that ISAs are specifically focused on long term investment. They are just a tax free wrapper. A day trader is actually better off using an ISA vs GIA. Also, stop loss does not necessarily mean short term focus.

If it were a SIPP then I’d agree.

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Agreed. The only difference between and ISA and a GIA is the tax status.

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When I first got introduced to trading/investing, this feature always stood out as odd one.

While I don’t mind it being added(will not use it).

I was always under impression, that you don’t lose money until you sell.

Thus to me name stop loss is wrong, it should be lock loss. As that is what it really does. It makes you lose money. If we talk about mid-long term.

If you did your due diligence, if stock fundamentals are OK, I actually love scenario where price drops due to some noise/negative press.

It is actually best time to buy.

But to each his own.

Cheers

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@Vedran I actively hope to see my stocks perform badly in their first year or 2 of being in my holdings admits the best time to rapidly grow your stake in that company with the same funds. A secure business will reflect in the stock price once the market corrects.

@Antidev The reason I treat ISA as for the mid to long term is because of its deposit restrictions. You cannot deposit as much as you want to it. The restriction means that primarily you should aim to look to grow its value naturally over the span of a few years, and if you earn enough to exceed this limit then back to the investment account where you can just deposit more to cover bad losses.

It doesn’t change why stop loss is a fundamentally horrible feature that ensures you lose money. What if the market just touches your stoploss and you sell out only for the market to return back to a bull run that closes higher than your position opened at? Not only have you sold at a loss, you sold out when just waiting would have netted you a profit. You cannot predict the market so it’s not as simple as saying “you should have set it lower” either.

It is not investing if you sell out of a position just because the market is going bad, that’s speculation. Do your due diligence and you will have no reason to even learn about stoplosses nevermind need to use one when investing.

Hi @Dao, I should clarify I’m not a short term investor.
However, I still disagree with you. The limit on how much money you could put in an ISA has no bearing if you don’t have enough money to meet the cap. You don’t know OPs situation or how they plan to use the account, or even how they plan to use the stop loss.

I personally would view it as being diligent to set a stop loss or preferably a trailing stop loss after I had made a huge gain. Eg. One of my stocks made a 70% gain in 3 months and has dropped to a 20% gain recently. A trailing stop loss would of 15-20% would have been great to lock in a higher WIN.

Too often doing research and diligence is equated to being psychic. I can’t see the future so a stop loss is just another tool to manage risk.

You are confusing differences between strategy and the tools use to enact them

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@Antidev you make the argument based on the scenario of having already made profits. if your stock has seen such a rapid gain of value in 3 months then you should be checking that the company can sustain such a valuation and if not you can make the informed decision to pull out of a position, either partially or entirely until you believe the valuation is back within acceptable bounds or to do nothing in the event that the valuation is accurate. the OP requested they be able to have stoplosses automatically active on a position.

stop losses do not work by taking the value you want and selling them for that. they just trigger on the value you set no matter the final price. perhaps you are thinking of a stop-limit which puts shares up for sale at a target price and only accepts a fixed price to complete.

If the market gaps while you aren’t paying attention, then you end up selling your shares at the going rate which could greatly exceed your estimated loss. sure you might have locked in 20%+ gains, but the price may not continue to decline and may instead recover or outperform by market close.

your example is sound in theory and math, but the market runs on more than that and you don’t need to be psychic, you just need to be responsible with your money. too many buy/sells of a share turns you from investing to trying to time the market.

the same argument applies to: you bought a share and set a stop-loss with a difference of 20%, shortly after the market panics, stock value drops over a day/week by 21-30%. the investor has now sold their shares and ended up losing 20%+ of their money. the share price could recover in another day/week but it no longer matters because the investor does not have the shares that are recovering their value due to selling out. They LOCKED in their loss. they did not “stop” it happening.

either of our theory could play out at any given time, its not trying to predict the market or being psychic. It is acknowledging you cant be, so don’t expect a feature to make up for your decisions. don’t just look at the intended result of a feature while ignoring what else can happen as a result of it.

I gave the OP my opinion on the feature and asked them why they want it. I did not presume to know their situation or make any assumptions on that basis.

as for the ISA, the deposit is a very real restriction that cannot be ignored on the convenience of “if you don’t earn enough”. you can withdraw and deposit as you please in a normal account, which you cannot do in an ISA as T212 does not offer “flexible” ISA’s. money you withdraw does not lower the count of what you deposited. You can also only make use of the tax-free benefits of an ISA if you happen to have funds in it from which to benefit, something you wont have if you end up taking unnecessary risks with a feature you may not fully understand.

In the investment and ISA accounts you can already set stops and stop-limits. the question for the OP is why they would want to set “automatic” ones and why a stop-loss rather than a stop limit in this case.

references for those interested:

https://www.gurufocus.com/news/188058/stop-loss-a-good-sign-youre-lost--should-stop

compared to your example of trying to lock in the profits at high-moments, I agree with when charlie munger said that you can outperform those who try to time the market simply by holding a good stock over a long enough time. a stop-loss has no place in a good investment strategy.

Thanks all for your input. The reason for me requesting a a stop loss function are:

  1. I’m not going to reach the ISA cap, so it seems sensible to use the ISA as a tax-free trading account. I probably won’t make enough to worry about CG tax anyway but just incase to be optimistic.
  2. I sell off if my stock loses 15%. No discussion. Currently I set a price alert at about 12% loss so I can keep an eye or place a limit order and sell if I reach 15% loss. I haven’t got the cool to see investments do badly for a year or 2 - even if I can rationalise it! I prefer to keep these stocks on a watchlist and show interest as momentum starts moving.
  3. I don’t want permanently open limit orders because I will lose out on/get charged dividends for having short positions open on my stocks.
  4. I have a full time professional job that has nothing to do with finance and means I am likely not to be able to act on price alert notifications or watch prices etc. In fact doing so could cause a lot of serious issues - so a function that allows me to semi-automate my loss management strategy (right or wrong) would be awesome.

My current trading style involves taking relatively small (5-20% depending on sector/stock) but regular profits which I re-invest in my next “target”. I’m definitely not gaining the most profits available, but it feels safe and delivers consistent “cash” which I can risk re-investing. There are a few stocks i’m holding onto and even averaging up while momentum is running in their favour. (Which I think is the more usual behaviour for ISA account use from what’s being said here).

Hope that makes sense

So essentially, there is currently NO Stop-Loss feature available in Trading 212 INVEST or Trading 212 ISA?

It appears there IS a Stop-Loss feature in Trading 212 CFD.

If so, it seems bizarre that it is not available on Trading 212 INVEST and Trading 212 ISA.

If you are a set-and-forget type investor, where you are NOT watching it everyday, I would say it is equally important, as it would be to a day-trader.

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@uk_jamie the stop loss feature is labelled “Stop” on the interface.

it is there in ALL accounts. however, I would advise against using it as it just triggers a sell and guarantee no minimum pricing. Instead, use Stop-Limit.

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Thank you @Dao

Please see my other thread, where you may want to add your comment: Stop Loss Order- How To Guide- Trading 212 INVEST

I’d also like to see this added to the ISA account. Although not everybody will use it, it would be nice to actually have the choice!

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Stop loss is a good feature if you are using your account for day trades…which I am.

before more people comment on this old thread, please read my last post.

Stop-Loss ALWAYS useful whatever timeframe or instruments are traded. March’s crash should confirm that to you. The opportunity cost of waiting for the recovery is appreciable and if you stop out of a falling equity losing a small amount and then buy back in for the recovery you can actually turn a 5% (stop) loss to a 300% profit (as I did with some instruments). Not stopping out means around now you should be starting to break-even but you’ve not had liquidity for the past 6 months as a result, so you will have missed opportunities to trade and make more money.