News Spike in "right" direction caused a loss

Has anyone else run into this?

On Wednesday 1/21 at 19:30EST/00:30GMT I set 2 pending orders for EUR/USD as follows:
Order 1: Sell Stop @ 1.4090 | 1 Lot | EUR/USD | SL @ 1.4590 | TP @ 1.4085
Order 2: Sell Stop @ 1.4090 | 1 Lot | EUR/USD | SL @ 1.4590 | TP @ 1.4080

Turn on your 1 minute chart to follow along.

Here's what happened in the background:
1) Something happened in the world (more on this below) that caused the EURO/USD to spike down ... in the "right" direction ... remember I was planning a short scalp.
2) At 21:00EST/02:00GMT the price drilled down 53 Pips in less than 1.5 minutes (90 seconds).
3) Price immediately bounced back up 43 Pips over the course of the next 4 minutes.


I checked my charts quickly after doing the evening routine before bed and was dismayed to see a pretty significant loss. I thought something must be wrong in the world for me to loose 500 pips in less than 2 hours.
Upon checking the chart I saw that price was relatively where it was when I originally set the order and there was no 500 Pip move.

I called my broker to figure out what happened.
They couldn't really tell me what happened but explained that it is risky to trade during news times. I insisted that I was not "News Trading". I checked the news for that day filtering for the EURO, USD, JPY, CHF and there were no "red" or even "orange" news reports coming out around the time the spike occured.

I'm not a news trader ... just had a feeling (based on S+R) that price would move downward at some point while I was asleep. If anything I'm an anti-news-trader ... if that makes sense ... I try not to trade during news periods because of the insane volitility.

The customer service rep said a report came out in China that drove the price ... I interrupted and said "China!, you're kidding right? "China?"
I hung up ... calmed down and went to the FF news filter, put a check in the box next to CNY and saw that there was indeed a red news report at 0200GMT.
I called back with a calmer head and said, "lemme talk to your supervisor".

So here's my analysis of what happened, which was hard for the customer service rep to figure out ...
1) Price drove down so fast that it blew past my entry level and entered at the bottom of the spike move.
2) Price drove back up almost as fast hitting my original TP level.
3) Metatrader "interpretted" my TP levels as stop loss levels and "Stopped me out" for a loss.

Here's the funny part ... well, not funny cause it's LIVE and its real money but you know what I mean ... in the Journal there are two green boxes. Two green boxes with negative profits.

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Has anyone else run into something like this?

Thanks!

Your analysis sounds right. sell/buystops can do that especially since most brokers turn TP's/SL's into market orders at execution.

Thats the way the cookie crumbles...

Once I was in a trade and news was coming out but I had my SL in and figured if hit I'd be out about 15 pips... well, news spiked GY down over 100 pips and thats where my stop loss got filled. So basically in spikes you get filled at the next price that it trades at, and if that next price is 100 pips, thats where you get filled, so what you're saying makes perfect sense to me. It might not happen often but I have seen it happen to me!

I don't get it. Entry with Sell-Stop at 1.4090 and SL and TP (?) 500 pips higher? Is that a typo?

It would also help if you posted the price where your entry stops and stop-losses got filled, along with timestamps.

There was no 500 pips move in the market and even if they slip you on the sell side where you entered the trade as a sell stop you cannot be stopped 500 pips away. This looks like a scam. You should be refunded.
I think you should also name this broker here.

There doesn't need to be a 500 pip move, if he really entered a target-limit order on that short-trade 500 pips above entry price, it becomes immediately marketable and therefore will execute (athough the best available ask-price, not 500 pips away).

Still think its a typo. Why would you enter a Target 500 pips on the wrong direction?

Hey Guys - Thanks for answering so quickly.
Sorry for the typos. The situation is hard enough to decifer through text without me putting in the wrong info.

My intended TP was 5 pips and 10 pips respectively below my entries so here are the updated lines:
On Wednesday 1/21 at 19:30EST/00:30GMT I set 2 pending orders for EUR/USD as follows:
Order 1: Sell Stop @ 1.4090 | 1 Lot | EUR/USD | SL @ 1.4590 | TP @ 1.4085
Order 2: Sell Stop @ 1.4090 | 1 Lot | EUR/USD | SL @ 1.4590 | TP @ 1.4080

I was so confident in my analysis (that did not include the Chinese news report) and my ability to TP profit such a short distance away from initial entry that I felt comfortable going to sleep and setting a WIIIIIIDE protective stop loss of 500 pips.

Skreech / Pornstar - I got filled at exactly 04:00 FXDD Server Time.
I don't think it was a scam - I just think its a flaw/bug or a disconnect somewhere between FXDD's liquidity provider and the MT4 Platform.
The supervisor refunded me a total of $310 in the form of a "good will bonus". $310 = the total loss due to the platform's craziness during that 4 minute round trip entry/exit.

Triple7 - I agree with you for the most part in general but completely disagree you in this specific case. If my TP was, say, 500 pips away from and entry stop, I got filled 250 pips away from my intended entry because of a price spike and subsequently only took 250 pips in profit I'm okay with that because -- yes that's the way the cookie crumbles.
However, in this case I see absolutely no reason why the system should be "interpreting" someone's intended TP as Stop Loss just because price blew past the intended entry.
If anything, controls should be in place such that if price blows past your intended entry, the entire order is cancelled or locked out to protect traders against the problem and limit brokers from having to answer angry phone calls and dishing out refunds.

Everyone - thank you all so much for answering so quickly and sorry again for the confusion and typos. You guys are the breast.

My bottom line is that after trading with FXDD for a year this is the first and only time this specific problem has occured. The supervisor handled it well but I get the impression that their own tech guys don't understand the complexities/nuances of their platform works in a Live trading environment. Come to think about it, why would they? Most of the tech guys and customer service reps are likely finance majors interning at the NYC desk or this is thier first job post-graduation. They are not "Live Traders" who's supplemental income depends the system not "behaving badly".

Where did the sell-stops and the TPs fill, if you dont mind me asking?

I do see what looks like a news-event during that time, on my charts anyways.

I don't mind you asking.
The Sell Stop was filled at the bottom of that 1 minute spike (take a look at the 1 minute chart) at 1.4067. TPs were filled at 1.4080 and 1.4085 respectively on the way back up over the course of the subsequent 4 minutes.

My charts show a low of '76 bid-price and '86 ask-price (mb-trading).

The question is, what should happen in such a case like yours (incur that much slippage on the entry that it puts your TP in a loss immediately).

On oanda, the entry-order would have been canceled if it would realize a loss immediately. Its probably the sensible thing to do, since such a trade is not in the interest of the trader.

On an exchange (or matching systems like mb trading) the orders would just execute and realize a loss. There are clearly defined rules when and how an order fills (or not).

I'm not a mt4 user, so i am unsure what MT4 is supposed to do in such a situation. Is there any documentation about intended behaviour available?
From your post it sounds like the ask price after the entry was acually below your TP, and only when it moved back up to yoyur TP-level the TP would execute, filling at a worse price than would have been possible.

My charts show a low of '76 bid-price and '86 ask-price (mb-trading).

Hi Shrek - A picture speaks a thousand words.
Take a look brother.
My Broker's low pirce was 67 and that's where I was filled.

On oanda, the entry-order would have been canceled if it would realize a loss immediately. Its probably the sensible thing to do, since such a trade is not in the interest of the trader.
I think this is the way it SHOULD work. See my rant above.

I'm not a mt4 user, so i am unsure what MT4 is supposed to do in such a situation. Is there any documentation about intended behaviour available?

As far as I know I'm the only one to post something like this on FF.
My broker's customer service rep seemed very suprised that this occured.
Being an Information Technology Project Manager I would imagine that this is just a bug in the system and not the way the system functions in general. I could be wrong though -- I didn't develop the technology. Where I work we have quality assurance analysts come in to literally try implement normal to crazy test cases to purposefully expose flaws in a technology solution in an effort to make a more perfect system before it's released to the user community.
I'm sure coders on this site will attest that they don't go live with an EA without first putting in considerable testing time through demo.
And I'm not talking about whether the system is viable but rather does the EA meet the requirements of the system itself.

Back to my original question -- has this happened to anybody esle out there? I'm hoping this is an isolated incident.

First of all, setting a STOP entry order (something I would never do) is risky enough, but doing so on a hunch and then going to bed is simply beyond novice.

Secondly, this is what happens eventually when you trade solely based on support/resistance levels and completely try to ignore/avoid the fundamental aspects, thinking that they won't affect you. WRONG.

If you were more aware of the fundamental side of the currency pair, you would have known that during this past week or so, the so-called "orange" and "red" news releases on the economic calendars have made FART impacts on the market. The market hasn't given two shits about those news releases.

Lately, it's been the Obama bank plan, Bernake reconfirmation, and China's monetary tightening that have been taking the dollar for a ride. As for the euro, the Greece crap has almost blown over, but risk aversion against the currency is still in full effect.

There's your news lesson for the day. Those that think they can rely solely on the technical and avoid the fundamental solely by not trading during "red" news releases is sadly mistaken about the nature of the market. The news is always, always affecting every currency pair.

If you had known that, you would have understood why China has been strengthening both the dollar and the yen for several days now, as well as contributing to the anti-euro sentiment.

kibescorp, you are missing the point here. Its not the question if this trade was a good idea or not, the question is rather: what is the intended behaviour of mt4 when such a situation occurs. I find it rather astonishing that i cant find the respective docs on the mt4 site and that none of the bazillion mt4 users on this forum appears to have a definite answer. Order execution policy is a somewhat central point that must be clearly defined (i would have thought so anyways).

Thanks Shrink -
You have the "fundamental" point of the thread in mind.
Others don't realize that this is a "technical" discussion about the technology that supports my ability to exectute trades.
If I want to have a drawn out internet discussion about whether pure tech anal or pure func anal or hybrid anal is the best trading strategy I'd go elsewhere on the site ... then I'd proceed to spend hours I'd never get back. I'm a trader, not an investor.

RBCOE's trading strategy works for RBCOE and wheover doesn't like it can S.M.B.B.C.

Shrike - I'm not surprised we can't find any documentation to support exactly how the platform works. It exists, I'm sure but it would take a little skullduggery (as Mike Tyson would say) to extract the order execution policy.
I might call a few brokers on Monday to see how far I can get. Don't plan on spending more than an hour or so spinning my wheels though.

I'll let you all know what I come up later.