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Why do markets have minimum stop requirements


u0362565

Question

Hi all,

Different markets have different minimum stop distances and these change depending on market conditions.  Why is there no restrictions on the limit but there is a minimum on the stop?  Either it is helpful because there is no point in a smaller stop or they don't want you to set a smaller stop for some reason.

Thanks

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13 minutes ago, u0362565 said:

Hi all,

Different markets have different minimum stop distances and these change depending on market conditions.  Why is there no restrictions on the limit but there is a minimum on the stop?  Either it is helpful because there is no point in a smaller stop or they don't want you to set a smaller stop for some reason.

Thanks

Hi, it's to lessen the change of the order being rejected and getting requotes (try again) when there is high volatility. Normally you can adjust the stop order once it's in. Profit targets are usually given more space to run anyway.

Edited by Caseynotes
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1 hour ago, Caseynotes said:

Hi, it's to lessen the change of the order being rejected and getting requotes (try again) when there is high volatility. Normally you can adjust the stop order once it's in. Profit targets are usually given more space to run anyway.

Ok thanks for that. When the position is open I still think they prevent you from moving the stop any closer to the current market level than the min stop set on the order/deal ticket. I have a tendancy to think any restrictions put in place on these platforms is to put you at a disadvantage but that is obviously not the case here.

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15 hours ago, u0362565 said:

Ok thanks for that. When the position is open I still think they prevent you from moving the stop any closer to the current market level than the min stop set on the order/deal ticket. I have a tendancy to think any restrictions put in place on these platforms is to put you at a disadvantage but that is obviously not the case here.

For known events such as data releases the platform automatically increases the min distances a certain number of minutes before and then gauges volatility after to decide when to lower it back to normal. Obviously if you are sitting at the screen you can bail out anytime but generally tight stops will get whipsawed out until the market calms and a consensus on direction is reached. 

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