A stop loss does not guarantee that your position will close at the exact price you set. When the relevant market price reaches your stop-loss level, the stop loss is triggered and executed at the next available market price. If the market moves quickly or gaps through your level, the execution price may differ from the stop-loss price. This difference is known as slippage.
How is a Stop Loss executed?
A stop loss is an instruction to close your position when the relevant market price reaches the specified level.
Once triggered, the stop loss is executed at the next available market price. The actual execution price therefore depends on the prices available in the market at that time.
For example, assume a Buy position has a Stop Loss at 1.1000. If the Bid price gaps from 1.1005 to 1.0995, there may be no executable price at 1.1000, so the position may close at the next available price.
Why do market gaps affect Stop Loss?
A market gap occurs when the price moves from one level to another without available prices in between.
This can happen when a market reopens after a closure, such as at the weekly open, or following significant market events.
If the market gaps through your stop-loss level, the position may be closed at the first available price after the gap.
A stop loss cannot guarantee execution at the price you set when the market gaps.
How does volatility affect execution?
During periods of high volatility, prices can move rapidly between available quotes. This can occur around major economic announcements, unexpected news, or other periods of significant market activity. As a result, the price available when your stop loss is executed may differ from your stop-loss level.
How does low liquidity affect execution?
When fewer prices are available in the market, there may be less liquidity at or near your stop-loss level.
The position may therefore be executed at the next available price rather than exactly at the level you set.
How does position size affect Stop Loss execution?
A large position may require execution across multiple available price levels if sufficient volume is not available at a single price.
This can result in an average execution price that differs from the stop-loss level.
Does a Stop Loss cap my loss?
A stop loss is designed to help manage potential losses, but it does not guarantee a specific exit price or a fixed maximum loss. The difference between your stop-loss level and the actual execution price may be larger during fast-moving or illiquid markets.
How can I manage Stop Loss execution risk?
- Consider your position size carefully when holding positions through periods of potentially high volatility.
- Be aware of scheduled market closures and major economic events.
- Allow for execution uncertainty rather than treating the Stop Loss as a guaranteed price.
- Check the actual execution price in your Account History after the position has closed.
Important: These measures may help manage risk but cannot eliminate the possibility of losses, slippage or execution at a price different from the specified Stop Loss level.
How do I review the Stop Loss execution?
To investigate a position that closed at a different price from your stop-loss level:
- Open Account History in MT4 or History in MT5.
- Find the relevant position or order.
- Compare the Stop Loss level with the recorded close price.
- Check the date and time of execution.
- Compare the execution time with the market price and trading conditions at that time.
If the relevant market price reached your stop-loss level but you believe the position was closed at a price that was not available in the market, contact the Moneta Markets Trading team: tradingenquiry@monetamarkets.com for an execution review.
Please provide your trading account number, order ticket number, stop-loss level, actual close price, execution date and time including your time zone, and any relevant screenshots or other supporting information.
For the general concept, see Why Was My Order Executed at a Different Price?
