Getting Stopped Out Before My Stop Level

simterann22 · #1 06-24-2009, 01:08 AM

Hi all,

I am VERY new to Forex. I have been trading futures but like to play Forex on my sim account at present....and I love it if only I can break this problem.

Anyway....I've been setting up bracket trades around congestion and pivot points to capture breakouts. I found I was getting my stops hit prematurely so I increased my buffer by making my stops further out. Still no luck. So what 'they' do is get me in the trade, charge me at an inflated market price then it goes against me! ARGGGGH!

You will see in the attachments on a GBPCHF trade that my stop was set at 1.75660 but the price never exceeded 1.75610. Huh?

Is this because of the spread (which I'm still not fully aware of or is it the way I'm setting up my trades?

Thanks a lot.

thalestrader · #2 06-24-2009, 09:39 PM

Originally Posted by simterann22

Hi all,

I am VERY new to Forex. I have been trading futures but like to play Forex on my sim account at present....and I love it if only I can break this problem.

Anyway....I've been setting up bracket trades around congestion and pivot points to capture breakouts. I found I was getting my stops hit prematurely so I increased my buffer by making my stops further out. Still no luck. So what 'they' do is get me in the trade, charge me at an inflated market price then it goes against me! ARGGGGH!

You will see in the attachments on a GBPCHF trade that my stop was set at 1.75660 but the price never exceeded 1.75610. Huh?

Is this because of the spread (which I'm still not fully aware of or is it the way I'm setting up my trades?

Thanks a lot.

Yes, it is the spread. If you are short with a bucket shop, then once your stop appears as the offer, you will be filled. You are trading in the example the GBPCHF, which tends to have one of the larger spreads. For bucket shop trading, you are often better off adding the spread to your stop loss.

Best Wishes,

Thales

Tams · #3 06-25-2009, 09:15 AM

there are 2 types of stops:

1. catastrophic stop -- a "wide" stop used to protect against black swan events.

2. operational stop -- a tight stop used to protect against:

a) wrong analysis

b) market direction changed after entry

Tams · #4 06-25-2009, 09:17 AM

there are 2 reasons for a stop to be taken out:

1. the stop is bad

2. the entry is bad

bakrob99 · #5 06-25-2009, 09:22 AM

Originally Posted by simterann22

You will see in the attachments on a GBPCHF trade that my stop was set at 1.75660 but the price never exceeded 1.75610. Huh?

Is this because of the spread ...?

Trade the Currency Futures and you won't have this problem. Your bucket shop will move the market to take out your hard stop unless it is really wide.

cedricthefrog · #6 07-08-2009, 02:33 AM

Trading a wide spread market off a 5 min chart is the road to ruin for a spot FX beginner in my opinion (and experience

). Take it up to the 4h or daily for those types or markets. Also be aware that fixed spread spot FX dealers are usually bucket shops and will trigger "market spikes", especially on volatile currencies, to trigger clusters of stops.

my 2 cents. Good luck.

Blaiserboy · #7 07-08-2009, 07:43 AM

Originally Posted by cedricthefrog

Trading a wide spread market off a 5 min chart is the road to ruin for a spot FX beginner in my opinion (and experience

). Take it up to the 4h or daily for those types or markets. Also be aware that fixed spread spot FX dealers are usually bucket shops and will trigger "market spikes", especially on volatile currencies, to trigger clusters of stops.

my 2 cents. Good luck.

I quite agree...... the faster time frames can spell disaster for even the most experienced traders.....

The 240 minute chart will allow time for detailed analysis and then entry can be made on a faster chart such as 60 minutes....

Too often we get to thinking that a fast chart will yield easy money quickly and the result is often the opposite.

This I have learned and relearned several times from experience......

thalestrader · #8 07-08-2009, 08:11 AM

Originally Posted by cedricthefrog

Trading a wide spread market off a 5 min chart is the road to ruin for a spot FX beginner in my opinion (and experience

). Take it up to the 4h or daily for those types or markets. Also be aware that fixed spread spot FX dealers are usually bucket shops and will trigger "market spikes", especially on volatile currencies, to trigger clusters of stops.

my 2 cents. Good luck.

If you are trading off S/R, then time frame should be irrelevant for the intraday trader, or nearly so. If you are trading the EURUSD and price develops support at 1.3900, then that support will be identifiable on a 1 minute, 5 minute, 15 minute or 240 minute time frame.

If you are trading S/R, then your stop must be placed below support for a long position and above resistance for a short trade. The wide and variable spread does need to be taken into account, as all it takes for your stop to trigger is that the stop price appear as the bid (for a sell stop) or as the ask (for a buy stop). This is what takes folks out of their positions without price actually having traded at that price outside of the firm (and without that transaction being printed on the "tape," so to speak.

To compensate for the spread, my daughter typically places her stop at a point twice the size of hte average spread beyond support or resistance. If she is at her computer when price gets near the stop, she will exit on a market order if she sees price actually trade at or beyond her "ideal" stop loss; and if she is away fromthe computer, her stop will be executed, but her loss will be a tick or two or three larger than it would be in a 1 tick spread market. This small additional loss she calls "slippage."

As far as the spikes are concerned, again, proper identification of support and resistance, and placing your stop safely beyond those levels should keep you from being shaken out of your position unduly.

Best Wishes,

Thales

Blaiserboy · #9 07-08-2009, 08:22 AM

I will be interested to see your daughter start to post, I am sure her thread will be of great interest as she starts to show up the experienced traders......

thalestrader · #10 07-08-2009, 08:43 AM

Originally Posted by Blaiserboy

I will be interested to see your daughter start to post, I am sure her thread will be of great interest as she starts to show up the experienced traders......

I don't know that I'll let her post anytime soon.

I do let her read my posts here, as well as some of the other participants posts after I have previewed them (she is a fan of DbPhoenix, although this may have more to do with his avatar than his posts; and she does enjoy his blog), and I did register a user name for her here at the forum.

However, I have obvious concerns about allowing her actively to post on any internet forum, let alone one where the other particpants are nearly 100% adult males.

As far as her trading goes, she has been showing me up lately.

Best Wishes,

Thales