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Reason behind minimum market stop distances?


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I get why there are minimum stop distances for guaranteed stops due to market volatility and slippage, but what is the logic behind having a minimum stop distance requirement for normal market stops? If there's any slippage I have to pay for it anyway.

Taking Litecoin (E1) as an example, there's a minimum market stop distance of 1.25 points. If I'm buying 100 Litecoin, that stop would get triggered once I've lost 125€. Is there a reason why I can't have my position closed when it's going down 0.7 points (70€) during trading hours? Why do I have to lose an artificially imposed amount of money before my stop triggers, especially since I myself would not have this limitation if I remained glued to my monitor?

Shouldn't the minimum stop distance just be the size of the spread?

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On 11/01/2020 at 14:42, Nexuscrawler said:

I get why there are minimum stop distances for guaranteed stops due to market volatility and slippage, but what is the logic behind having a minimum stop distance requirement for normal market stops? If there's any slippage I have to pay for it anyway.

Taking Litecoin (E1) as an example, there's a minimum market stop distance of 1.25 points. If I'm buying 100 Litecoin, that stop would get triggered once I've lost 125€. Is there a reason why I can't have my position closed when it's going down 0.7 points (70€) during trading hours? Why do I have to lose an artificially imposed amount of money before my stop triggers, especially since I myself would not have this limitation if I remained glued to my monitor?

Shouldn't the minimum stop distance just be the size of the spread?

Thanks for your question. The reason we have minimum non-guaranteed stop distances in place it to avoid immediate closure. Depending on how volatile the market is will have an impact on where we set the non-guaranteed stop. If we see fast movement, we don't want the market to move out of your favor slightly, you be closed out, then stabalises again. 

I do understand where you're coming from though that it's your money and you should be able to place the stop as close as you want so I will pass this on as feedback. 

All the best :)

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