I was wondering if anyone can help me understand a trade I made in MT4,
as part of my trading plan, one of the tasks is to review my trades.
I shorted USDCAD on the 3rd of June at 19:12:35 (UK Time), the trade was open on a 4h chart with price of 1.34381.
The trade went into profit and once it was 40 pips in profit I manually set up a trailing stop of 40 pips.
The trade was eventually stopped the day after at 22:20:45 (UK Time). The SL was recorded by MT4 @ 1.34023 and the Price @1.34032, I assume the difference is due to the spread.
But the part I don’t get is why the SL was activated, The 4hr candle that was in play when the trade was closed started at 20:00 UK time, two hours and 20 minutes before the trade was closed.
The highest of this candle was 1.33984, which is about 4 pips below the SL, in fact, the only time that the price action reached that level was the 5th of June at 12 pm.
Wider spread at time of low volume is most common reason for this. Charts don’t normally show spread, and spreads are commonly widened at such times. In fact, charts are usually drawn from the bid price.
Right now the market is closed and I am looking at a 4-pip spread on USD/CAD - I expect this to narrow when the markets open and settle down, barring news events.
I was watching and waiting for Tom’s response before replying. But he is quite correct. And welcome to the wonderful world of MT4 (where only the bid prices are shown). Point is: variable spreads is the reason why you cannot make sense of what happened by just looking at an MT4 chart.
I’ve just looked on my broker’s (UK) proprietary platform as well as on their MT4 platform. On the proprietary platform I am able to see the ask price. The ask price did indeed trade to 1.34031 at some point during that four hour candle. This is not shown on MT4 though i.e. on MT4 the bid price high for that four hour candle was 1.33987. And obviously this is at my broker i.e. your broker’s spreads may have been wider at some point and a 4 pip difference between your SL and the price you’re seeing on the MT4 chart is pretty small.
Point is: nothing wrong i.e. I don’t personally think that you were maliciously stopped out.
Pity though. Trade went on for another three bars. Maybe something to consider is to lose trailing stops and try and use some of the good 'ol tried and tested methods of manually trailing stops if you’re able to i.e. if time is permitting. In this case as an example: you could have trailed a stop at the highest high of the preceding one bar, two bars, three bars, or even five bars. All depends on how aggressive you want to trail stops. If using these methods though then add a few pips plus the spread to these highest highs. Of course though: there are a gazillion methods or ideas on how to trail stops. Some would even have, possibly, kept you in that trade right up until yesterday.
Thank You both for your reply. Yes, the only reason I used a trailing stop is that I am unable to be behind the computer at all time. I have also another trade closed due to a trailing stop at 40 pips and then the trend continued in my favor, I could have made more profit. I will need to adjust my strategy to find myself in less similar situations.
Hey listen. On the other hand: you still took some profit. That’s pretty much all that counts and certainly better than a loss. But it is frustrating nevertheless when you’re out of a trade, albeit with a profit, and price continues on in what would have been your favor. It’s the nature of the beast I’m afraid.
Also factor in a lot of times especially if your trend trading the markets might pause for relief (which you probably got hit on the pullback) and will either continue the trend, reverse the trend, or continue ranging. This was one of my first major issues but likewise it’s better to taken out on a shorter profit than a loss as well. It’s a juggling act of sorts trying to find the perfect balance in a place that has no real equilibrium.
I absolutely see how you could be caught out by this sort of market price action, its happened to me so many times and no doubt its only a matter of time until I’ll get caught again.
But there are things to be done that mitigate damage and reduce the risk of loss. Firstly, you correctly identified a) trend and b) downtrend. The classic approach now for the private retail trader is find an entry pattern, press the sell button once, set a SL and a TP, and go away from the screen. The aim is that (in more than 50% of cases) the TP is hit before the SL, and that the TP is 2 or 3 times further from entry than the SL. So, profit in the bank, sleep easy, happy days.
Press Ctrl + M to bring up the display of the pairs in your list, bid ask prices and spreads. Take note of the highest and lowest spread values on your broker for the different pairs at different times and days. Adjust your SLs TPs and trail stops accordingly if you want. Also keep in mind the different major news releases which tend to result in huge spreads.