Price gaps through stops on illiquid moments

[Amanhasnoname]

A stop-loss assumes price passes through the level in a continuous way. In thin markets, it jumps over it.

When liquidity is low, as in the first minutes after the Sunday open, around rollover or just after a surprise headline, price can move from one quote to another several pips away. A stop that sat in the gap fills at the first available price on the other side.

The result is a loss larger than planned. Traders sometimes call it a stop that didn't work, but it worked as designed. The order became a market order and filled at the best available quote.

There's no way to eliminate the risk, only to manage it. Reduce size in thin conditions, avoid holding positions through known low-liquidity windows, and size every trade on the assumption that the stop may slip.

It also helps to measure. Review past stop fills and see how often they happened more than a pip beyond the level.

If it happens often, risk per trade is understated.

A related check is to compare the stop level with the lowest price printed between the trigger and the fill. If the gap is regularly more than a pip, the stop is sitting in a region where liquidity is thinner than the plan assumed.

How much worse than planned have your stops filled on average?