I’m a software developer and I want to implement an algorithm for forex.
I already have something working, at least with historical data.
Because historical data is on a 1 minute time frame in some cases, at least with gold, in one minute it can go below the stop loss flag that I have. In production the algorithm will read the price every second.
So my question is:
If I have a transaction with a stop loss of 100 pips and the price changes in one second more than 100 pips (for example 200 pips) will my account suffer a 100 pips loss or a 200 pips loss?
It depends on the type of broker you’re using, the state of the market, whether they’re able to execute your stop-loss reliably, and whether you have a “[I]guaranteed[/I] stop-loss” (there are such things available but they’re very expensive and I don’t actually know anyone who routinely uses them).
In principle, though, times of large, sudden movements of the type you describe do tend to be [U]exactly[/U] the times that traders can easily lose more than their stop-loss - and sometimes a [I]lot[/I] more.
Depends on the liquidity at this time. If broker is NDD it will rely on liquidity providers which can or can not accept order close at your stop loss level. Read what means first available price and FIFO rule
Hi vikt0r - I might admire your spirit of enterprise but I have to part company with you over the basis of a stop-loss. To me, a stop must be placed in a position defined by technical analysis - its unrealistic to expect the market to make a rational move or turn just because it suits one particular trader’s money management rule.
It follows therefore that I cannot respect or recommend any trading strategy that demands a stop set at a fixed or random number of pips from entry - its not just my fundamental prejudice, I also hold it makes no sustainable profitable sense. So I have to think you’re travelling in the wrong road - turn back brother.
My understanding was that he was asking the question to understand a ‘worse case scenario’ - just like if we use a SL order and price gaps past this level due to an erratic, low liquidity move in the market?
I’m not too sure where to read that he was ‘[I]requesting to be told a trading strategy[/I]’ either?
It follows therefore that I cannot respect or recommend any trading strategy
Ironically, I have always used a fixed stop attached to different currency pairs - statistically speaking, if placed after a ‘round number’ level in price, it has a [I]higher[/I] probability of holding than if placed on non-round number levels
Funny what you stumble into when analysing past market data
A set stop is a stop is a stop. If you set a stop on a long at an intermediate higher price than worst case it still gets triggered. If you don’t set it to trigger at this level, what is its point? I’m afraid I regard discretionary stops as just delusional.
I totally agree with you on the fact that discretionary stops are ‘[I]delusional[/I]’ - but where i become stuck is trying to find where anyone mentioned [I]discretionary[/I] stops in the first place?
Well, I never mind giving the world the benefits of my vast knowledge, whether asked or not…
But actually a discretionary stop is implied in what you said, not vikt0r, about “worse case scenario”. That does mean there must be a “not so worse case” price reached before the worst case. vikt0r only talks about one type of stop to cover the whole trade and the whole stake, which I believe is correct, but I still say a fixed count stop is going to give random results long-term.
That depends on the volatility and liquidity and next best available market price. If the price for 100 pips is available, your stop loss order will be executed and your account will suffer loss of 100 pips. But if the price for 100 pips in not available, price changes to 200 pips, your account can suffer loss of 200 pips.
Future is always uncertain. No one knows where the market goes. So every trader put stop loss to minimize the losses. Every broker has this option for trader. Yet some trader likes scalping and short term trade. In that case they didn’t prefer to use stop loss. They just took the profit and log out from the market by getting a little profit. But if anyone who want to do long term trade must use the stop loss to minimize the risk.
On the contrary, Gary: scalpers use [I]tighter[/I] stop-losses than those used by any other kinds of traders, and typically attach [I]more[/I] importance to them, because their trading-style predicates that if the price doesn’t quickly move in their favour after entering the trade, they probably wouldn’t want to be in the trade at all.
All retail forex traders, regardless of their trade-durations, should be using stop-losses. Every trading forum has its share of horror stories from what can happen when they don’t. Even if only to have some additional safety as a mitigation against potential computer/internet/power interruptions, it costs nothing to enter at least a “disaster-stop” routinely and automatically with every trade.
Stop loss is a favorite tool of traders specially beginners feel confident with Stop loss. They thin know they will stop their loss in trading. However main aim of stop loss is manage your account at the limit so that you will not face full loss.
This is way, you need to work with regulated type Forex broker, slippage and spike is very common issue on market maker broker, even they create false market movements by spike! I am a news trader, believe me I have suffered a lot on broker issue! Regulated Forex brokers are very honest on their live trading service, so stay with regulated broker and stay safe!
I am also always using stop loss on trades, in my view forex trading is included as speculative investment and market full uncertainty, and stop loss is one feature to manage the risk if likely trend market move not like as our favour, this for manage risk in trading
Setting a stop loss is an integral part of successful trading. However I think it is ridiculous to set a stop loss of 10 pips because minor fluctuations can close our order. if we place a stop loss very near like 10 pips or 15 then a good order can be closed with a loss. I prefer to place a stop loss at least 30 pips away and usually place it from 30 to 80 pips depending upon the trading strategy.
it really depends on you and your methods. There’s no calculations for the exact SL and TP because the market just doesn’t work like that. So observe your trades (preferably a demo account ) and learn from them and adjust your SL accordingly.
