here we go
it's nice to be loved.. huh hehe
WALL OF TEXT hehe
Hi mate, i heard my name being called from afar and i came running hehe
it's like this
all brokers are different, ok so you really need to ask your broker WHAT THEIR POLICY IS ON THIS
I just spoke to my broker (pepperstone) to get the official word
Now. also keep in mind, THIS STOP OUT THING OVER THE WEEKEND..... HAS NEVER EVER HAPPENED TO ME
so it does come down to
- Having enough funds to manage your risk
- Knowing which instruments moves how far
Example... you would be trading bitcoin and putting a stop loss on a long trade that sits at - 30 pips LOL
because you get a rude shock monday morning when you realize it just moved 400 pips the wrong way
but. YOUR QUESTION IS.... WOULD IT HIT THE STOP LOSS
here is your original picture
Your answer is
THE OPEN OF THE NEXT CANDLE
because this is what the broker told me.
Let's imagine you have an entry point
let's imagine you are in a BUY trade
let's imagine that your stop loss is at -40 pips
let's imagine that trading is closing for the week and there is 1 minute left in the trading week
let's imagine you now have to go to the toilet to take a number 2 and it's really hard to push out
(Clearly this is an important point to explain graphically so that the time taken is graphically explained and clearly understood that it's gonna take longer than 1 minute)
anyway, you come back to the charts, you realize you can't do anything other than wait until monday morning
(now, let's leave SPREADS out of it, let's just assume that the spread for the entire time is 0 pips because our broker is so awesome hehe)
ok. so ...
let's now imagine that MONDAY MORNING.... it GAPS DOWN by 80 pips
so.. What happens
Scenario 1 - Your stop loss at -40 pips gets taken out and you only lose 40 pips - SORRY, NO, THIS DOES NOT HAPPEN
Scenario 2 - You lose the entire 80 pips - GUESS WHAT............ YES THIS IS WHAT HAPPENS
i'll tell you why
now the broker says THEY WILL FILL YOU AT THE NEXT AVAILABLE PRICE
because a STOP LOSS or a TAKE PROFIT is merely a BUY ORDER or SELL ORDER , depending on how you started the trade
so, if you start a trade in a BUY, Your take profit is a SELL, and your stop loss is also a SELL
if you started in a SELL, well then.. your T/P and S/L are a BUY ORDER
and that holds true for pending orders as well
SO. if the next EXECUTABLE PRICE is -80 pips
of THE FIRST EXECUTABLE PRICE for that monday morning ..... RELATIVE TO , your previous price
then.. yeah.. UNFORTUNATELY you not only get stopped out, because YOU STOP LOSS IS AUTOMATICALLY EXECUTED
if in a BUY trade, IF THE STOP LOSS is HIGHER than the current open price, IT WILL TRIGGER THE STOP LOSS
if in a SELL trade. IF THE STOP LOSS is LOWER than the current price, IT WILL TRIGGER THE STOP LOSS
now here's the imporant part
YOU WILL GET FILLED AT THE NEXT AVAILABLE PRICE.
Not necessarily IF THE STOP GETS PHYSICALLY HIT
people call this SLIPPAGE
so now the big question is this
Let's say that you have a certain amount of money in your account balance an you could afford to go -100 pips
before you get a Margin Call (aka 80% Margin Level %)
well then if the price dropped to - 100 pips, you would GET A MARGIN CALL INSTANTLY first thing monday morning.
Now.. Assuming price came back up to correct. YOU'D BE FINE
but let's say that your ENTIRE ACCOUNT BALANCE could only sustain - 150 pips, and at that point you would be at 20% Margin Level % (meaning.. YOU'RE DONE and the ACCOUNT IS BLOWN UP)
well. if price went - 200 pips for arguments sake (or , anything lower than 150 pips)
YOU WOULD INSTANTLY BE OUT OF THE GAME AND HAVE NO MONEY
Regardless of where you put your stop loss.
i think this is the answer you were looking for .... Right ?
so, how do we protect against this
- have a big enough balance in your account
- Know how your instrument behaves and think of the worst case scenario and then multiply it by 4 or 5 times.
and then account for that
DOES THIS HELP YOU UNDERSTAND IT A BIT BETTER
so.. your answer is...
it would be Auto Closed at the OPEN OF THE NEXT CANDLE - THE NEXT AVAILABLE PRICE THAT THE BROKER AGREES TO FILL YOU AT