Why did this trade close a loss?

[johnbosworth]

Placed a long trade on Walt Disney, please see picture. This stopped out tonight at 10pm UK time. Price did not go anywhere near the stop. Can anyone explain what might have happened here? Thank you.

[cate]

Hi John,

Just a thought, but it looks as though your chart is set to display the mid price. You really need to set it to show the Bid because if that hit your stop it would have triggered a sell of your position. But if the Bid didn't hit that level either, then I agree something's wrong. 

Good luck,

Cate

[johnbosworth]

2 hours ago, cate said:

Hi John,

Just a thought, but it looks as though your chart is set to display the mid price. You really need to set it to show the Bid because if that hit your stop it would have triggered a sell of your position. But if the Bid didn't hit that level either, then I agree something's wrong. 

Good luck,

Cate

Hi Cate, thank you for replying. I really don't understand that. Are you saying that when I place a buy I should set to Bid and vice versa? Seems to change the charts bars which is a bit worrying. John

[neueneuen]

Not exactly.

Your chart is showing a Mid price which is simply a calculation of middle between Bid and Ask. You can (almost) never buy or sell at Mid price because it does not exist in the market, it is simply a calculation. You long at Ask, you close a long at Bid; you short at Bid, you close a short at Ask. Your stop loss for a long position is the stop loss that will close a long, therefore should be matched against a Bid price and therefore a Bid chart, not a Mid chart.

To show a Bid chart click on the Mid text near Daily text on the top left side of the graph and choose Bid.

Ask minus Bid or Ask minus Mid doubled is spread. To simplify, this is essentially the commission you pay to the broker. From a commission perspective, the broker (IG) does not (should not) care whether your position goes up or down - it affects your profit and loss, not theirs (in IG case you would also pay ~0.8% for conversion of profit or loss if currencies of account and instrument don't match, but this is besides the overall point). The broker cares from risk perspective (you having enough margin) but not from profit perspective.

 

All that being said, when you posted the question initially, it interested me and I went and checked. I could not find a price at that moment that would trigger your stop loss at the described time either. Now there are some conditions that could have triggered force closure of a position despite market price - e. g. if you did not have enough margin in the account for all positions, not just this one - but this information is not available in your post.

Edited June 14 by neueneuen

[cate]

13 hours ago, johnbosworth said:

Hi Cate, thank you for replying. I really don't understand that. Are you saying that when I place a buy I should set to Bid and vice versa? Seems to change the charts bars which is a bit worrying. John

Hi John,

I only meant that if you want to check what levels the price actually hit you need to set the chart to Bid to see if your stop was hit. Because if the Bid (which will be lower than the Mid that is currently displayed on your chart) hit the stop level then the stop will have been triggered. Similarly if you have a short position, you need to look at a chart of the Ask (which will be higher than the Mid) to see whether a sell stop will have been triggered. Does that make sense?

I always flip my chart to either the Bid or the Ask, depending which direction I'm trading,  when deciding where to set my stop levels, if I'm trying to be precise - it gives a more accurate picture. But even with that precaution spreads (difference between Bid and Ask) can widen at times of high volatility/ low liquidity, so sometimes at a turning point a stop gets hit that's further from the mid than you might expect.

But it sounds as though Neueneuen has discovered that the level of your stop shouldn't have been hit, according to the Bid prices on the chart.

Hope it gets sorted out!

Cate