Ask Colin

Should stops be executed during the day, or the next day (end of day data)?

This is something that is up to you. It will depend on whether you have the time to monitor the market during the day.

You are quite correct in the idea that if a stop is hit during the day, and if it is possible in Australia to have the stop already in the market with your broker, you would be taken out immediately. Depending on the volatility and depth of the market, there may be less slippage than acting next day on end of day data.

While I personally don't generally watch the market during the day and act next day on the end of day data, if the market is at a critical level, I might monitor it during the day and act then. However, there are two reasons why this works for me:

1. I am not a short term trader, so my time frame is such that intra-day movements are not generally that important.

2. I work on a 0.5% maximum risk on each tranch of a stock that I buy in my money management (position sizing) calculations, knowing that I will get slippage and that my 0.5% might therefore be greater in practice. However, if you are already risking 2% to start with, then the slippage becomes very significant sometimes.