I was trading CHF/JPY. Quite happily in the positive - high enough that I set my stop loss to about 5 pips above break even. Everything seemed to be going well, then the prize froze for about a minute and then on next tick had plummetted to -6.8, a 15 pip drop that completely ignored my stop loss. I’ve heard of slippage, but this looks like a software error that flatlined the reading.
I can’t see the timeframe or the date, but I have a bar like that on my M1 chf/jpy. However, the price returned quickly and it doesn’t look like yours. Anyway, I don’t think it is a software issue. You probably had a stop with a slippage restriction. That slippage restriction looked to be passed by, hence in theory you didn’t accept the trade nor did you accept a requote. I am not saying that you did that on purpose, but that is how it in theory looks like.
These things can happen. Just as you can miss a trade because your slippage was too tight, so can that also happen when you want to exit your trade. Do you trade manually?
The timeframe is Tick on Marketscope, which I guess is every second? It occurred at around 17:01 EST today, which is there on the chart, though hard to read, I admit. I can understand that the the vertical line is slippage from a sudden jump in price, but why does the line flatline and go horizontal prior to that? Normal movement for tick is fairly rapid fluctuation as you can see happens before and after the circle. I don’t think that’s pure slippage in filling the order. The weird thing is that the graphs look different on my home computer, where I am now and my work computer, where I was monitoring the trade. On my work computer, this flat section is present, and at home it’s not.
I do trade manually, but my stops were in place about 30 minutes prior to this. What is a slippage restriction?
You probably had a stop with a slippage restriction. That slippage restriction looked to be passed by, hence in theory you didn’t accept the trade nor did you accept a requote.
I’m not 100% sure what you mean by this part.
Hi Merper,
I can’t quite make out the numbers on your chart, but based on the time you posted your question, I think you might have encountered a situation where the spreads widened during trade rollover around 5pm New York time. If that’s the case, it’s not an error. Here’s a post where I explain why spreads widen around rollover time.
Let me know if you have any additional questions, or if you need to log a trade audit.
Jason
Merper,
Jason thinks the same. A slippage restriction is when you set your trade to be caught when no more then (example) 3 pip difference from the desired entry or exit. So if the current tick is 1 pip above your stop and the next tick 6 pip lower, it will pass your desired exit with 4 pip. As your slippage may be restricted to 3 pips, you instructed your broker not to execute your stop as it is outside the desired range. That is, if you slippage was restriced. I think standard is about 3 pip.
Jason, yes I see now that is what happened. There is a momentary 20(!) pip spread at that instant between bid and ask. I was actually in a trade with the AUD/USD at the same time and this did not happen in that trade at all. Why did it happen for this pair and how do I prevent it from happening in the future?
Is there some setting for this in Marketscope or a default value? My stop was set for around positive 5 from my entry. I got closed out at -6.8, so that’s a 11 pip spread. Also, if the restriction prevents the stop from executing then what triggered the sale of my entry? It looks that there was no restriction and the second the spread widened after the computers reset, my entry was sold. I just want to know how to make sure it doesn’t happen again. Manually close entries before 5? Again, it didn’t affect the other trade I was in.
Hi Merper,
While spreads can widen at 5pm EST because of trade rollover, this widening tends to be less pronounced with the most traded currency pairs. It all depends on what prices the banks are quoting. Since AUD/USD is more liquid than CHF/JPY, often there are enough banks quoting tight spreads even at 5pm that the spreads don’t widen on AUD/USD as much. If you are trading short term with very tight stops, you might want to consider being flat around the 5pm trade rollover time.
There are no restrictions that would prevent a stop from executing when it’s triggered. If there was such a restriction, you would run the risk of being stuck in a trade as the price continues to move against you. That is why stop orders are designed so that when they are triggered, they become market orders that will be filled at the best available price. This price could be worse than what you specified in your order in which case you would experience negative slippage, but it’s still better than the alternative of being stuck in a losing trade.
In regards to restrictions that would prevent an order from executing if the price has changed, I think you might be referring to the Market Range feature that’s available for market orders. This feature allows you to specify how much negative slippage your are willing to tolerate on a market order. A market range of “X” pips assures that all or part of your order will be filled within a “X” pip range of the current market price (“X” pips above or “X” pips below) if liquidity is available.
While the Market Range feature is currently only available on market orders, not stop, limit or entry orders, it’s worth noting that slippage can either be positive (where you get filled at a better price) or negative (where you get filled at a worse price). These stats show that overall, positive slippage is just as likely to occur on our platform as negative slippage: http://docs.fxcorporate.com/faq/slippage-statistics.pdf
There are specific trading strategies and market approaches that may increase your chances of receiving positive slippage. For example, we recommend opening and closing trades using limit and limit entry orders in most cases. The benefit to these order types is that you are guaranteed to receive your requested price or better without receiving negative slippage. Remember, that although limit orders guarantee price they do not guarantee execution making order types an important consideration in any trading decision.
Jason
Jason, in short. When a stop is triggered, it will get filled. The price can be in your favour or against you, butit get filled. Slippage restriction doesn’t apply to Exits?
May sound silly from someone how has been trading for a while, but I trade with scripts, that handle requotes (if there was a requote) and stuff. So I don’t see them myself.
Slippage restrictions only apply to Limit Orders, Limit Entry Orders and Market Orders with the Market Range feature enabled.
With Limit Orders it is possible to receive positive slippage, but not negative slippage. On Market Range Orders with the Market Range feature enabled, negative slippage is limited to the tolerance levels you specify, but there is no limit to the amount of positive slippage you can receive. That is why we recommend using Limit Orders and the Market Range feature on Market Orders to take advantage of positive slippage, while limiting negative slippage.
When a Stop Order triggers, it becomes a Market Order with the Market Range feature disabled. That means negative slippage is possible, but at least the order will be executed, which is the main priority when you’re trying to get out of a losing trade.
Ok, will have to keep this in mind. Lessons better learned early, I suppose. Thanks for the explanation. Just to clarify, the reason the spreads change so drastically is a change on the bank software side? The spreads tighten back to 3-4 pips quite rapidly.
We have 10+ liquidity providers quoting us prices, but around 5pm EST everyday they will refresh their systems for the new trading day as rollover interest is applied. Some banks will widen their spreads at this time, while others stop quoting prices altogether. It’s a relatively quiet time in the market, since the New York session just ended and it’s still a couple of hours until Tokyo picks up. In a 24 hour market, banks have to pick their spots to do maintenance, and 5pm EST has become the chosen time. For a short term scalper, it’s probably best to be flat around 5pm EST, and then look to get back in after the spreads come back in line. You can avoid having to worry about rollover interest that way too.