Hi,
I started trading with a small live account a few weeks ago after demoing a lot. I opened an account with an STP (straight through processing broker) which offers low spreads on most forex pairs.
But during off market hours and before market closes at friday the spreads increase a lot. Normally it is not a problem if EURUSD jumps from 1 pip to 5-7 pips for a few hours or if minors temporarily have a spread of 10-12 pips. But sometimes the spread widening during these hours is extreme: today i was in a trade on GBPCHF and before the market closed, there was a spread of 24!! pips which stopped me out. I checked other brokers and price feeds and price never traded near this level my broker had.
My quesion is: How can I avoid being stopped out during these hours when the spread tends to widen? Of course I don’t open positions during these times but as a swing trader I often keep trades open a few days so I have to manage them correctly. Would it help to move my stop loss accordingly to the spread widening of the broker and after spread returns to normal place it again where it originally was?
Apart from this I am very satisfied with my broker.
What would you reccomend?
Thanks for your help
You should reach out and discuss this issue of slippage with your broker(s).
Generally speaking, if you want to eliminate the risk of slippage and being stopped out, then the only solution is to NOT enter a stop loss in your broker’s platform that will automatically close your trade and instead, use a “mental stop”. Of course, there are drawbacks to this approach as well.
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What is Slippage?
When orders are sent out to be filled by a liquidity provider or bank, they are filled at the best available price whether the fill price is above or below the price requested.
To put this concept into a numerical example, let’s say we attempt to buy the EURUSD at the current market rate of 1.3650. When the order is filled, there are 3 potential outcomes.
Outcome 1 (No Slippage)
The order is submitted and the best available buy price being offered is 1.3650 (exactly what was requested), the order is then filled at 1.3650.
Outcome 2 (Positive Slippage)
The order is submitted and the best available buy price being offered suddenly changes to 1.3640 (10 pips below our requested price) while our order is executing, the order is then filled at this better price of 1.3640.
Outcome 3 (Negative Slippage)
The order is submitted and the best available buy price being offered suddenly changes to 1.3660 (10 pips above our requested price)while our order is executing, the order is then filled at this price of 1.3660.
Anytime we are filled at a different price, it is called slippage.
What Causes Slippage?
So how does this happen? Why can’t our orders be filled at our requested price? It all goes back to the basics of what a true market consists of, buyers and sellers. For every buyer with a specific price and trade size, there must be an equal amount of sellers at the same price and trade size. If there is ever an imbalance of buyers or sellers, this is what causes prices to move up or down.
So as traders, if we go in and attempt to buy 100k EURUSD at 1.3650, but there are not enough people (or no one at all) willing to sell their Euros for 1.3650 USD, our order will need to look at the next best available price(s) and buy those Euros at a higher price, giving us negative slippage. But of course sometimes the opposite could happen. If there were a flood of people wanting to sell their Euros at the time our order was submitted, we might be able to find a seller willing to sell them at a price lower than what we had initially requested, giving us positive slippage.
Hope it helps you guys
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Oh and I use JAFX. I find their spreads better than other brokers.
Thanks for your reply. But are we talking about slippage here? Because I entered the trade at the right price but during rollover periods the spread widens, eventually causing some stop losses to be triggered. So I am already in a trade which I entered for example 8 hours prior when the spread was normal. Then, during rollover periods the spread increases a lot and then turns about normal again.
If you are, then go with them; but don’t forget, it kills your green pips. I always like to trade with narrowest trading spread.
Yes I know but only for a short period of time until the spread turns normal again. What does speak against adjusting the stop loss during these short time periods?
We might not be talking about the same thing then. My apologies.
Maybe, it’s for the high voltage news session. But I have no experience about this kind of problem.
Hi Metalex, I encountered the same issue as you. Saw the spread widening a minute before the market closed, and also over the weekend. googled it, then called my broker to ask about it. The response i got was that due to liquidity providers giving an off market quote, spread tends to surge. However, the broker claims they disabled all active orders mins before market closes. Hence, my stop loss order was not executed even though it might seem so on the platform.
It seems that im trading with a Straight through processing (STP) broker, hence their matching of orders with banks. The other brokers that you checked out might be a market maker, where they provide their own prices, hence the difference. Just my two cents worth, not sure if it’s right.
Hello, I suffer from the same thing when I have open positions and at midnight, i.e. when the markets close, the spread increases, and the increase varies from one pair to another, for example, I am now trading on a pair of pounds, the spread was 3 points, now 13 points 
When I asked about it, it became clear that these times are very poor liquidity
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