Slippage due to high volatility

Trading Discussion
1

Hi

I recently started trading and I encountered a situation I’ve never met. During the brexit news I placed a buy stop order on gbpusd at 1.32010 sl@ 1.31760 and tp@ 1.32570… a while later I lost money and the trade reported as 1.34398 > 1.32570 and I had lost money… I contacted my broker to get some answers and they said my trade was executed during the UK announcement with expected GBP volatility and there was a slippage and it’s common, is it possible that a trade can be opened 2000pips later and never went down to 1.32 and still be called a loss?
Thanks

2

Yes it is possible, though you can ask the broker of they can give you more detail.

The most significant price change in GBP/USD occurred at 2200 UK time when the election poling stations closed and the exit poll was simultaneously released by the media. I don’t have your broker price quotes obviously and I am spreadbetting anyway, but as a for instance my GBP/USD one-minute chart gaps from 1.31742 to 1.34337.

Also visible on the chart is that the 1.31742 was the candlestick closing price at 2159, the 1.34337 opening price was at 2205. So for 6 minutes around this announcement my firm was not offering trading in GBP/USD.

It would be amazing if anyone trading at this time had not suffered from slippage, suspension and wide spreads.

1 Like
3

IMG_20191214_144224
IMG_20191214_144224720×1280 89.6 KB

Ok but if the buy stop order triggered on the price I never input, why would my broker change it from 1.32010 to 1.34398… weren’t they supposed to cancel the trade because it wasn’t valid anymore

4

You’ve been caught out by the definition of a buy stop order.

A buy stop order has to be set above the market’s current price and instructs your broker to buy for you at the first available price at - or above - the price you set. In the event of a bullish gap swallowing your entry price, they will buy at the first available price above the gap.

check on your platform: you might in the future guard against over-paying for entry by setting a buy limit order. This would instruct your broker to buy for you at - or below - a price you specify. The price you specify must likewise be above the market’s current price.

Sorry for what’s happened, hope you didn’t get burned too badly.

5

Thank you very much for your help, it was the first time I saw a “profitable” trade lose

6

's OK, we’ve all been there…

7

Hello DE-1,

Please allow me to butt in here.

I agree with the explanation given by tommor, regarding the bad fill that you got. In a disorderly, fast-moving market, price can gap way beyond your stop-order, before available liquidity makes it possible for your order to be filled.

After price gapped past your intended entry level, your stop-order (to enter) became a live (market) order, and was subject to being filled whenever market conditions made filling it possible, even if price was then hundreds of pips beyond your intended entry level.

It wasn’t 2000 pips. – It was a bit more than 200 pips (actually, 238.8 pips) beyond your intended entry price. Recall that the fifth decimal place in any non-yen price represents tenths of a pip.

Lastly, refer to my reply (below) to tommor, regarding a stop-limit order to buy, which would have prevented the loss which you took.

If your broker makes stop-limit orders available on your platform, and if you had placed a stop-limit order to buy at 1.32010, then when price gapped past your intended entry level, your long position would not have been opened — because an entry at 1.32010 or better (meaning 1.32010 or lower) would not have been possible.

At that point, your exposure to risk would have been limited to your original stop-loss. That is, if price first gapped past your stop-limit order at 1.32010, and then retreated to (or below) 1.32010, your stop-limit order (to buy) would then be filled (assuming available liquidity), and you would be in your long position, as intended. If price then continued to retreat lower, it could hit your stop-loss, generating the predetermined loss you originally planned for.

Alternatively, after hitting and filling your stop-limit order, price could reverse direction again, and proceed to hit your original take-profit.

8

Hello tommor,

This is correct.

I think you mean to suggest a stop-limit order to buy — not a buy limit order.

A stop-limit order to buy would indeed be placed above the current market price. But, a buy limit order to open a long position can only be placed below the current market price.

Here is how Investopedia explains a stop-limit order (which DE-1 might have been able to use) compared to a stop order (the order type which he did use) —

A stop order is filled at the market price after the stop price has been hit, regardless of whether the price changes to an unfavorable position. This can lead to trades being completed at less than desirable prices should the market adjust quickly. By combining it with the features of a limit order, trading is halted once the pricing becomes unfavorable, based on the investor’s limit. Thus, in a stop-limit order, after the stop price is triggered, the limit order takes effect to ensure that the order is not completed unless the price is at or better than the limit price the investor has specified.

9

Far as I can tell there is not difference between a buy limit order and a stop-limit order to buy. They have identical effect on what the broker does. In view of what you say I suppose different brokers use different phrasing.

My SB broker will allow me to set, to go long, above the current market price -
a buy stop order
or
a buy stop-limit order
or, to go long below the current market price -
a buy limit order.

I think the orders’ specifics are the same, its just the descriptive titles that differ.

10

to not create confusion let s call them a buy stop and a buy limit, buy limit goes under the price and a buy stop above, ur both correct but there s confusion with the + order+ word. 1 thing i can t understand, if the dude placed a buy stop above price and price gapped up( on my account it didn t gapped btw) why should he lose? have they moved his stoploss(assuming he had 1) or it was a margin call? can t quite understand if he had the stop below curent price and price went up triggering him even at an worse price, still… why the loss? maybe i m missing something or there s something i haven t read