Does a Stop Loss trigger when....?

Beginner Questions
1

(This question has been answered) :heavy_check_mark:

Hello Everybody, nice to be here finally with an account instead of windowshopping through the Questions.

Have learned a lot from this website, thanks to everyone!

TLDR: Question marked with “!!! … !!!” and emojis at the bottom.

I’ve been demotrading for what feels like ages now. Started about 3 years ago (please don’t shoot me, everyone starts somewhere and I know that I, a young padawan, am still) learning about psychology, sizing, lots and what nots, risk calculation, all the 100’000 different strategies (yes, just like most beginners, i hopped around from strat to strat like a rabid rabbit until I came to the MIRACULOUS conclusion that what I was doing was COMPLETE INSANITY, expecting different results while doing the same bullsh** every single day, HIGHEST WINRATE MAXIMUM PROFIT 99% TRADING STRATEGY… yeah… you know what I’m talking about). Forward-testing the same strat for quite a while now (I did it, I’m better than at least 75% already!) and continuously improving my vision on favourable setups, TP and SL placement.

But I really believe that demotrading and expecting the same results set me up for failure! In this simulated environment I get filled instantly with no spread, my TP always triggers, and my stops are immaculate as if they were the last existing bulwark stopping armageddon from happening while price dances 1 tick away from triggering before going into my direction… and exactly the last sentence is what worries me, and what this sim-environment does not teach me… don’t get me wrong, I understand that when livetrading I won’t get the same prices when market entering a trade, and that a stop may fill worse than placed… but which price triggers my Stoploss? if you made it this far, I hope it was an amusing read and thank you kindly … Here goes nothing, moving on to my question.

:thinking: !!! Question !!! :thinking:

Regarding Stop-Loss trigger price… I have been looking for a clear answer but some sites say this and others say that… I ask you with the utmost humbleness for clearing this up for me because I want to start Livetrading soon.

Example for Long/Buy Position:

I entered buy at 100, SL 95 (market), Ask 101 & Bid 99.
Will my SL trigger if displayed/current price reaches 95 and fill me at Bid, or if Bid price reaches 95?

Example for Short/Sell Position:

Entered Sell 100, SL 105 (market), Ask 101 & Bid 99 .
Will SL trigger if displayed/current price reaches 105 and fill me at Ask, or if Ask reaches 105?

My concerns are… if it would trigger when Bid/Ask reaches SL, could it be possible to get thrown out of the market without price even visibly touching my SL level? (meaning no wick no nothing, when analyzing printed candlestick - Highs/Lows not reach set level)

If triggered by Ask/Bid, can it be avoided by doing something? I rarely get stopped out when trading, and if I do it’s because price actually reaching my stop…

Thank you in advance !!

Edit: Highlighted TLDR, deleted a small portion because I mixed up some things.

2

A SL on a long is triggered when the bid price reaches the SL price. It doesn’t matter where the ask price is or how wide the spread is.

Likewise on a short, the SL is triggered when the ask price reaches the SL price. Note that from the chart alone price might visibly appear to have not reached the ask price, but this is because most charts are drawn using the bid price.

Note also that quotes vary faster than charts and it is possible for a quote to reach a price for a second or so without this being translated into a mark on the chart. So you could say that “live” charts are actually smoothed out records of prices, not a true record - this makes a difference when scalping or similar.

2 Likes
3

Thanks for clearing that up for me!

This does make it a bit difficult though. I really like my stops but I don’t want to get “scammed” out of the markets… I have set up my charts so I can see Market, Bid and Ask (blue/red lines for Bid/Ask). I don’t mind the spread when visibly getting stopped out because of my riskmanagement.

Would you recommend either adding a few additional ticks to my already widened stop or using a mental hard stop while monitoring the charts, therefore closing my pos when I see price touching my level and if not stopped during my session adding SL when I leave my computer.

Or can I use a “Market if touched” order as a Stop or is it the same story again with Ask/Bid? Don’t exactly know how they work… never used that type of order.

Edit: Forget that I talked about MIT orders as SL, My intelligence gapped there for a moment

4

I suppose the ways to be sure of not being stopped out by very brief price spikes or temporarily widened spreads would be to set the SL further out to avoid these minor price changes or - not recommended - to set no SL but keep watching full-time through the trade for a manual exit signal.

1 Like
5

Understood!

I appreciate it that you took time out of your day to answer my questions.

My best bet would be to start relatively small compared to what I would be trading to gradually transition from sim into live trading and see for myself how rough spreads can be. Might also be beneficial to adjust my psychology… skin in the game!

Going to implement your recommended advice on using a hard stop and modify it as I go to see how far it can be optimised to increase my odds of not getting stopped out from a winning trade while still maintaining a nice reward.

Thank you again for your time and input on this for me significant matter.

Wish you a blessed week and all the best!

-GigaChadTrader

3 Likes