I read somewhere that placing a stop loss can create a new order if there is a gap up or gap down over the weekend.
I’m placing a small longer term position and keeping it there for a few days or 1-2 weeks (I typically do swing, I’m branching out).
I always use a stop loss, what should I do in this instance? How do stop losses work over the weekend break?
I’m not 100% sure but it might vary from broker to broker. Oanda never “closes shop” as I understand, so for them the stop should be honored if there is movement over the weekend. However, they do jack-up spreads to something really ridiculous like 10 or 20 pips… so keep that in mind.
If you don’t use Oanda, check with your broker to see how they handle weekend movements and/or gap-open prices on Sunday.
The retail markets are closed over the weekend. Your stop if hit will not be filled until the market opens on Monday. Then you will be filled at the market opening price which could be below your stop.
Probably the best thing to do is hedge your positions on the weekend. Remove the stop loss and place another order in the opposite direction if your broker allows. The worst that can happen at Monday opening is the spread on the hedge will be lost. Then you can resume normal trading.
“Hedging” in this fashion is the same as closing the position out. Yes, it protects you against a big contrary move. It also, however, means you’ll miss out on a big positive movement. Potentially, it could also mean missing out of carry profits as well.
I asked this very same quesyion to oanda a while back and they responded similarly as ‘dusktrader’. You cannot be taken out for more of a loss than your stop is. I believe it depends on your broker though so not all are like that.
I can’t comment on Oanda but any MT4 STP/ECN broker is not obliged to honour your stops. A stoploss is exactly that…a stop order, which is a market order(ie execute at best available price in the market).
The fact that it is placed on broker’s server pre-emptively provides but a frational latency advantage over and above the direct market order sent from your terminal.
Your fixed spread brokers may be a different kettle of fish however…their business model is different to that of market execution brokers and they may well be in a position to guarentee stops…but they will get you back in other ways, so you pick your poison.
If the price is below your stop loss at start of trading on Monday, ICMarkets will fill the price at the next market value which could be well below your stop loss and your anticipated loss in the trade.