A 10 pip stop that fills 16 pips away at the news: three of them against a 5% daily limit

[Fairman]

A 10 pip stop that fills 16 pips away at the news: three of them against a 5% daily limit

You risk 1% on a $100,000 account: 10 lots, a 10 pip stop, $1,000. Then a news release hits and the stop fills 6 pips past the level. The loss is 16 pips x 10 lots x $10 = $1,600, which is 1.6% from a trade planned at 1%.

That is a stress case rather than the usual outcome, but it shows what a limit measures. The limit counts what happened, not what the stop said.

Now three such events in one day, for instance three trades on three pairs around the same release, or one pair that whipsaws. Loss: 3 x $1,600 = $4,800, which is 4.8%. Add commission of $70 a trade for 10 lots, $210 in all, and the day is -$5,010. That is 5.01%, a breach by $10.

Sizing for slippage means choosing a risk that tolerates the bad fill. At 0.7% risk you trade 7 lots, and the same 6 pip slip costs 16 x 7 x 10 = $1,120, 1.12%. Three of them make 3.36%, with room to spare.

[FXS HongKong Scalper]

A strong argument for not trading through releases on prop accounts. Even without a news rule, slippage around releases can eat a daily limit quickly. A safety approach is to reduce size by half on any trade within 15 minutes of a high impact event, or simply avoid entries in that window.

[Fairman]

The slip you plan for depends on the event and the pair. A scheduled high impact release on a major with deep liquidity might slip a pip or two on a stop, while a thin cross or a surprise can move several. Use your own fills: take the last 30 stop-outs in the journal, compute the difference between the stop price and the fill in pips, and look at the average and the worst. Suppose the average is 0.4 pips and the worst is 5. Sizing for the worst case on every trade is overly cautious, but sizing for the average ignores the day the worst happens, so some people choose the 90th percentile and treat the rest as accepted risk.

[Fairman]

Where you place the stop can reduce the exposure. A stop 3 pips beyond a known spike level instead of right at it may fill closer to its price because the first rush has passed. It does not remove slippage, and a wider stop means a smaller position for the same dollar risk, which changes the result of slippage. At 20 pips and 5 lots the slip of 6 pips costs 26 x 5 x 10 = $1,300, against the planned $1,000, while at 10 pips and 10 lots it costs $1,600. The wider stop made the slip hurt less in dollars, because the slip is a fixed number of pips and the lot count is lower.

[Fairman]

The cleanest protection is to be flat for the release. A trade that does not exist cannot slip, and for many setups the five minutes either side of a top tier release have worse spreads and no clear edge anyway. If the firm bans trading around news the choice is made for you. If it allows it and you do trade, lower the size for those trades as a rule, such as half the usual lots, and count them under a separate heading in the journal so you can see after twenty events whether the extra variance paid. Without that record the memory of one great news trade tends to outweigh the five that cost slippage.

[Fairman]

A daily loss limit reached by slippage is different from one reached by bad decisions, and the response differs. After three stops in a day, each filled worse than planned, the habit to avoid is trying to win it back with a larger fourth trade. With $4,800 lost and $200 of room, even a 1 lot trade with a 10 pip stop and some slippage uses $120 to $160 of it. The sensible number of further trades is zero. Having that written in a plan the evening before, such as stop for the day at 4% down, is better than deciding at 4.8% with the numbers on screen.