An unbelievable day happened on a quiet Thursday in 2010. In what came to be known as the "flash crash," stocks fell through the floor as automated traders exited the market. Some stocks dropped from normal prices of $50 or more per share down to near-zero or actually zero. In other cases, some stocks surged. Sotheby's stock price actually rose from $34 to $100,000! The quip of the day was from Diana Phillips, Sotheby's spokeswoman, who said "Clearly, it has been undervalued!" in an email.

While the exact causes are still under investigation, it was found that the automated rapid trading firms stepped to the sidelines when trading at the NYSE got clogged. Trades that normally were executed in less than a second were taking a minute or more to execute, causing the firms to step aside since the market was not acting in a way conducive to their trading strategies. When this happened, the liquidity dried up, such that there were sell orders but no buy orders, causing the wild price swings that were seen.

One issue that occurred was that stop market orders were executed because the price of various stocks fell below the limits that were set, causing investors to sell their shares at very low prices. When the stocks returned to their previous prices, these investors were left on the sidelines with big losses.

This is an extreme case, but in general I don't recommend using stop-loss orders because various traders will move the prices of stocks around to try to hit these limits and cause the stock to move up or down. If you buy quality stocks that you plan to hold for long periods of time, you'll want to hold through the minor market fluctuations anyway. If you have a big profit and are just using a stop order to avoid having to pull the trigger and risk missing out on future gains, you are likely to see the stock move down to your stop limit, sell your shares, and then continue on its merry way upwards. Just sell the stock. Remember the rule, "Don't Get Cute."