Why my stop loss didn't work? | 3Commas Help Center (2024)
When the stop loss timeout is active, the price should remain below your stop level for X minutes. Consider the delay carefully as there's no universal value for all situations, even on the same pair. If you set a long delay, the trade might close much lower.
Don't use the stop loss timeout with limit stop loss. After the time out, the price can be much lower than your limit order price, and your stop loss will often end skipped.
That will be the reason if your trade closes earlier than you expect. The trailing feature moves the stop level after the price peaks, so the stop loss price eventually changes more and more.
When the price drops or rises very fast, a market stop loss might execute at worse prices, and the limit stop loss might not execute at all.
Check the next section to find out more about limit stop losses.
Market orders are there to buy or sell something as fast as possible at the best available price right now. When the price changes very fast, the term "the best available price" can be equal to "the worst price."
The stop price is the price to determine when to place the limit order.
The order price is the price of the limit order that goes to the order book when the coin price reaches your stop price.
The limit order allows you to control the worst price you're willing to sell or buy your coins, but it also should be filled. The order is likely to be stuck on the exchange's order book if the price doesn't reach it or moves fast through your stop level. To prevent the limit order from being stuck:
Set the order price a bit higher than the stop price for short positions (Smart Cover).
Set the order price a bit lower than the stop price for long positions (Smart Trade, Smart Sell).
Don't set the order price higher than stop price for long positions or lower than stop for short trades. When you do this, the price should take additional bounce to reach and fill your limit order, which means it'll often be skipped.
Also, if you set the order price equal to the stop price, the price might skip your order on fast moves.
The order is likely to be stuck on the exchange's order book if the price doesn't reach it or moves fast through your stop level. To prevent the limit order from being stuck: Set the order price a bit higher than the stop price
stop price
A stop price is the price in a stop order that triggers the creation of a market order. In the case of a Sell on Stop order, a market sell order is triggered when the market price reaches or falls below the stop price.
In case of extremely less volume, where there are not enough buyers and sellers (referred to as an illiquid contract), the Stop Loss will not be executed as the stock may not have enough buyers/sellers at a defined stop-loss limit price by you for the order to be executed which is also known as 'Market depth'.
A risk of using a stop-loss order is that it may be triggered by a temporary price fluctuation, causing the investor to sell unnecessarily. For example, if a security's price drops suddenly and then quickly recovers. Here, you may end up selling at a loss and missing out on potential gains.
Keep in mind, short-term market fluctuations may prevent your order from being executed, or cause the order to trigger at an unfavorable price. For example, if the market jumps between the stop price and the limit price, the stop will be triggered, but the limit order won't be executed.
Incorrect Stop Price: Stop Loss and Stop Limit orders are intended to trigger at a certain point after a fall in stock price. As such, when entering a Stop price, it must be lower than the current trading price of the security. Tick Size: Some products set a fixed tick size for the minimum movement in the price.
Under normal market conditions, the set Stop Loss is not guaranteed. When the market is volatile, the Stop Loss rate you requested may not be traded in the market. In this case, the Stop Loss will trigger at the next available rate. The result is that you could lose more than you were prepared to on the trade.
With limit orders, your order is guaranteed to be filled at the specified order price or better. The only guarantee if a stop-loss order is triggered is that the order will be immediately executed, and filled at the prevailing market price at that time.
Some of the most common reasons for an invalid Stop Loss and Take Profit include: Stops are too close to the opening price. Stops must be placed 2 pips away from the entry price. Stop levels are incorrectly formatted e.g. too many figures/decimal places.
Market fluctuation and volatility. Stop-loss orders may result in unnecessary selling or buying if there are temporary fluctuations in the stock price, especially with short-term intraday price moves.
The golden rule of Stop Losses is that they should never be moved away from the market once the trade is opened. If a trader feels that their stop loss is incorrectly placed, they are recognising that the foundations of their trade are incorrect and therefore they should close out.
Summary and conclusion - Stop-loss strategies work
The best trailing stop-loss percentage to use is either 15% or 20% If you use a pure momentum strategy a stop loss strategy can help you to completely avoid market crashes, and even earn you a small profit while the market loses 50%
Stop-loss orders can sometimes make a trade order restrictive, which could eventually lead traders to get out of a trade prematurely due to a false market signal. No stop-loss trading strategy can help avoid false triggers created due to unforeseen market volatility or market noise.
Did the price take a sharp rise or drop? When the price drops or rises very fast, a market stop loss might execute at worse prices, and the limit stop loss might not execute at all.
A stoploss order is only valid for a trading day. If a stop loss order is not triggered during that day, it will automatically expire at the end of the trading session. To have an order that remains active across multiple trading sessions (up to 1 year) until the trigger condition is met, a GTT order can be placed.
A Stop-Limit eliminates the price risk associated with a stop order where the execution price cannot be guaranteed, but exposes the investor to the risk that the order may never fill even if the stop price is reached.
Step 1: Set a fixed percentage of your trading capital as a maximum loss on any trade, we recommend keeping it at 5%. Step 2: Calculate the Max points you can lose. So to do that, divide Max risk by your quantity. Then, Max loss points = Rs.
The most common reason for trades being closed unexpectedly is due to choosing stop or limit levels from the chart while using the incorrect price setting, resulting in the spread not being accounted for.
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