Gapping on a live account

Hi Traders,

I had an incident on my live account yesterday due to to strong gapping on GBBJPY and would appreciate your feedback to better understand what happen in a live environment.

On friday night, I had one open sell order at 139.5 with TP at 138.5 and one pending sell order set at 138.5. On Sunday open, GBPJPY opened at 137.17. As a result, my broker closed my open order at TP (138.5) and opened my pending at 137.17. Following discussion with my broker, I have been granted a rebate to cover the difference between TP and opening Price. Their explanations were as such:

"
We have finished our investigation, please see below for details and outcome:

When a client requests a trade, the price gets sent to "BROKER" and "BROKER" sends this price to the LP (this is seamless). This is done as BROKER is the counterparty for the LP and is then forwarded to the client. The time it takes the client to send a trade, be confirmed by BROKER and then BROKER to match off with an LP can be in the milliseconds. However in this period of time (the time the client clicks, and the price that is actually received can differ positive or negative) especially if the market is moving fast. This difference in price is rare and is an average of +-0.1 pip and can be negative to BROKER as well. It generally averages out to be break even.

This is different to slippage - slippage occurs when markets are moving fast, or for example there is a VWAP of pricing. As an example the client sends a trade on MT4 for 2 million of a price 1.3031. At that point in time, the top of book is 1million at price of 1.3031 and another 1million at 1.30313. The client would then get a VWAP price of 1.3032 which would look like slippage of 0.1 pip. During a fast moving market, if a client requests a price of 1.3031 and the next available price is 1.3035 due to high volatility this will be executed at the next best available price which would essentially be a negative slip of 0.4 pips. This works the other way as well if you request a price of 1.3031 and get filled at the next best available price at 1.3027 would be a positive slip of 0.4 pips

We keep price improvements but also take the hit when there is a negative price ‘improvement’. At the end of the month it’s practically flat but if we chose to give positive and negative price improvements +/- to all MT4 clients they would never complain on the positive improvement but there would be heaps of complaints on the negative ‘improvement’ which can be quite bad in cases. When we take both negative and positive on all trades It generally averages out to be break even for us.

However, you trade xxxxxxx is quite an extreme case and so we are happy to setup a rebate in order to pass on the improvement."



I' m not fully convinced by their explanations. If the gap would have been on the other side, I'm sure that the order would have been closed at the opening Price and not at SL. What are your experience with your broker. Is this normal practice ?

Thanks for your feedback, fellow traders.

different broker different rule. what is your broker?

Hey Fbird,
Indeed, the explanation of your brokers sounds a bit odd. From what my experience with broker is, both hitting take profit and opening the sell order should have been executed at the price during the market opening - 137.17. Putting the eventual slippage aside of course. The logic behind would be that if your entry or TP/SL level is in the gap, the price theoretically went through it, and the order should have been executed / triggered at the first price available on the market – in this case 137.17.

Sorry for responding late and thanks for your messages. My broker is Global Prime. UlliC, my understanding was the same as yours. But I have an email from them stating that if the gap were on the other side, my order would have been closed at SL. So from now, I am cancelling all pending orders before week end, deleting TP of open orders and maintaining SL.

Will report any news whenever I got a bad gap.

Thanks again guys.

So your GBPJPY sell stop order placed at 138.50 got filled at 137.17? 133 pips slippage. That's quite something. However, if the weekend gap was really that big, everything seems to be ok. You can't expect your broker to get orders filled at quotes that were not there.

True, however they closed my other open order at a quote that was not there....

Who the broker is will tell you if any "funny business" took place

Excellent point!

So to sum it up, the takeprofit on your sell order was honored, the broker filled it at a quote that did not exist. And the sell stop order got filled at the correct quote.

They may have compensated you afterwards, however I think it is concerning that your broker's infrastructure handles orders in this way.

I'm curious what they would say if you asked them directly "How could the takeprofit of my sell order got filled at a quote that did not exist?".