SL hit - but candle not close to SL?

Newbie here...[I guess me posting here makes it pretty obvious ;-)]

I just placed a demo trade on InterbankFX and got stopped out even though the candle (and the wick) wasn't close at all.

This might be a stupid question -- but how exactly does that happen?


Thanks,

Bernie

Hey Bernie

A very common mistake is not understanding the bid/ask and this is what I am assuming happened to you.

For example. We always Buy at the ask, and sell at the bid. Think of it this way, the bid and the ask is what your broker is willing to buy/sell at.

So say you had a sell order at 1.4700 and your stop was at 1.4710(essentially this is a buy order, in order to close a sell you must buy it back)

Well if the spread b/w the bid and the ask is say 3 when price reaches 1.4707 you will be stopped out, because the ask is at 1.4710(where your buy order is, and we always buy at the ask) now. Remember the ask is always above the bid, and we buy at the ask(the broker is offering to sell back your position, so we have to buy it). So since your chart shows bid only, it will show price going to 1.4707, not 1.4710. So if you really wanted to have your position closed at 1.4710, you would really place your stop at 1.4713(to account for the 3 pt spread). So on your chart you see the top of the candle wick/bar/what have you hitting 1.4707, because this is as far as the bid made it. It was simply the spread that nipped you.

Hope that helps

Mike

Thanks Mike!

I had figured the spread into it...or so I thought. After your explanation, I checked back and realized that I had initially looked at the wrong pair to figure the spread...duh.

I very much appreciate your reply...thanks again!

Bernie