Unexpected stop loss executed at 6-8 pips different than the actual price

Hello everyone.

I am new to Forex trading, so you will have to forgive me for the possible ignorance in my question here. I have been learning and evaluating forex for the last two weeks on a practice account. But tonight, something happened that scared me good because I don’t know exactly what it was. Here are the events that occured:

On Sunday 9/9/07 9:58 PM, I purchased a standard lot of USD/JPY at 113.040 with a stop loss set at 112.910. The pip spread was low, between 1 and 3, and volitility was low.
At 10:02 PM, the graph showed that the price had dropped to 112.960, and the P&L showed around $-80.00
At 10:03 PM, the graph was going back up and was at 112.970-112.990
At 10:03 I was continuing to watch the P&L very closely, and it was around $-50.00 when suddenly it zerod and closed my position.

I thought perhaps I accidentily hit the mouse and inadvertantly closed my position. So I looked at the log window and saw that my position was automatically sold at 112.910. I thought to myself “Oh, the price must have dipped for a split second and triggered my stop loss.” So I looked at the candlesticks on the 1-min graph at 10:03 PM, but there was no drop.

I requested a customer support agent to chat with to inquire as to what might have happened. They told me that the sell price did hit 112.910. But I didn’t see how, and they could not explain it to me.

Ok, I am new and all, but I’m finding it hard to understand that the actual pair price was 112.970-112.990, but the sell price was 112.910 triggering the stop loss. That’s a 6-8 pip spread! Did I experience some sort of crazy glitch, or do the spreads sometimes spike enormously at various unexpected intervals?

If anyone knows what happened, please help!

There are so many variables here that it is difficult to analyze what happened without knowing more.

The immediate question, of course, is, who is your broker !!?? :smiley: :smiley:

Just as well its a demo account.

My broker is www.forex.com. They have seemed pretty solid so far. But that unexpected sell has me afraid to open a real account.

I am still logged into the practice session and can answer any questions. Here is a copy of the P&L report:

9/9/2007 9:58:16 PM 11752874 Buy USD/JPY 100,000.00 113.040
9/9/2007 10:03:56 PM 11753313 Sell USD/JPY -100,000.00 112.91

9/9/2007 10:03:56 PM Total: -115.14

If you look at a USD/JPY graph at 9/9/2007 (sunday night) 10:03PM, do you see any indicator that this stop loss could have executed without the spread madly spiking?

To Brain2000 :

I am a very successful professional share daytrader and candlestick forex trader with good success.

I am extremely busy, have answered many questions on this forum but found that it is taking up too much of my time.

If you will take my credentials above, my advice to you is to ditch your broker. You are dealing with a “bucket shop” and they do nasty things to their clients. You are much better off with an ECN broker.

I am in Australia - my brokers are different.

Take on Oanda for now, I am told they are very honest and have the very best spreads.

As for explaining the other terms, please do some research. I do not have the time to tell you here. The best traders discover things by research, the lazy ones expect things on a plate - they lose their money.

To research, look up the many threads on this forum but also look up the [U]past [/U]threads. 90% of all the questions here are repeats.

Again 90% of the newbies do not look up the past threads.
If you study diligently the past threads, you will be well rewarded and become successful yourself.

work input = work output.

You need to understand the difference between an ECN broker trading the real fx market and a retail broker (as Tymen says often referred to as a bucketshop). These latter create a synthetic market, will actively trade against you and can move the price wherever they want and you have no recourse. They only have to say that the price you were stopped at was given by one of their liquidity providers anbd that is the end of that. There is no central system

Thank you both for responding. I do so appreciate it.

I have read a few threads here already, and have seen Oanda mentioned multiple times. I haven’t heard of it until today, but I am going to take your advice and switch. I’ve even visited their website already. I didn’t know there were “bucket shops”. I thought there were regulations to prevent such things.

tymen1, I fully agree with the notion of research and hard work. I am a lead programmer in a company that creates onilne ASP software internationally. I am also on call 24/7/365 to keep our datacenter online 99.99% (4 nines uptime). Hard Work and I are very close friends.

I have spent the last 2 weeks of my life researching every piece of work I could find on Forex trading that I can get my hands on. And I’m finding the more I learn, the more there is that I have yet to learn. There is so much to do to prepare before I open my real account. Even today, I spent 10 hours pouring over Fundamental Analysis and bookmarking all the reports, and looking at previous graphs to see how they may have been affected by the release of these reports. And the only thing I know for sure is that it will take me at least a couple years to get a good grasp on how fundamental analysis plays a significant role.

Again, thank you for your advice on this matter.

To Brain 2000 :

All the best to you. Your obvious hard work ethic and your willingness to reconsider things will ensure your ongoing success.

A success in forex that I think will come quicker to you than you expect ! :slight_smile: :slight_smile:

I tried forex.com when I started and I also noticed those “spikes” if you go to a 1 min time frame you will see it jumps or spikes almost 100 pips in a second. That is one reason I left them. Try a broker that uses mt4 software. fxdd.com is a good start. They have the best charting for free.

It looks like Oanda is still technically in the retail market. But, I am very impressed with their platform over anything I’ve seen so far. I found a list of about 10 ECN brokers and am going to give them a try before deciding which. But I’ve heard some buzz that Oanda is very close to a real ECN. I’ve even read a couple places that stated Oanda was ECN, but I think they were mistaken.

To Brain2000 :

No Oanda is not an ECN. But for ECN’s then Efx has a good reputation according to posters on this forum.

Justin from Efx tells me that they are starting up a new Omega charting platform which diplays not only the charts but the bid/ask as well. The Omega program is free whereas many of the other ones are not.

I was impressed by their prompt and specific replies to my emails.

what are those ECN brokers?
thank you.