Why did your stop loss fill at a worse price than you set?

Your stop was not hunted - there was nobody buying

You place the stop at 2,340. Price falls, and your position closes at 2,336. Four dollars you did not ask for, and the feeling that somebody saw you coming.

Nobody saw you. A stop loss is not a guaranteed price - it is an order to sell at whatever is available once the level you set is touched. The difference between those two things is the whole of this article.

So when 2,340 is touched, your order goes to the market to find a buyer. If there is a buyer at 2,340, that is where it fills. If the nearest buyer is at 2,336, that is where it fills. The gap is called slippage, and it is not a penalty - it is a description of what was there at that moment.

The order book: the picture you do not see

Your screen shows one price. Behind it is a queue: buyers at prices stepping down, sellers at prices stepping up, each for a quantity.

In an ordinary hour that queue is crowded and the steps between prices are tiny. So your order finds a buyer at your price or within a hair of it.

At the moment of a release two things happen at once: the buyers pull their orders, because nobody wants to be buying before they know the number, and thousands of orders arrive together. The queue empties and is rushed in the same instant.

So price jumps from one step to a distant one. It did not pass through what lay between - because there was nobody in between.

And this is why the spread widens before the release

You will notice the gap between the buy and sell price widening minutes before the number, sometimes tenfold.

This is not somebody taking advantage. A market maker is obliged to quote both sides, and does not know the number before you do. The spread widens because the risk it carries in that minute is larger.

The practical consequence: a position opened a minute before a release starts down by the spread alone, before price has moved a single step.

When this happens, on a schedule

And these are known in advance. There are no surprises here:

• Non-Farm Payrolls - the first Friday of every month, 13:30 CET. The largest scheduled move of the month.
• Inflation data (CPI) - around the middle of the month.
• US rate decisions - eight times a year, on dates published a year ahead.
• The Sunday open - the price gap between Friday's close and Sunday's open, and your stop does not protect you inside it.

The news page on this site carries the calendar. Looking at it before opening a position is usually what separates a trader from a gambler.

What you can do - and what you cannot

You cannot abolish slippage. You can avoid standing in front of it:

• Do not open a position in the minutes before a scheduled number unless you accept an outcome you do not control.
• Size on the assumption of slippage, not on the stop you wrote. If the stop is twenty points, size it as though it were thirty.
• Do not hold a large position over the weekend: the opening gap steps over your stop without touching it.
• A guaranteed stop loss is offered by some brokers for an extra charge, and fills at exactly your price. Know what it costs before relying on it.

And most of all: slippage runs both ways. Your take profit will sometimes fill better than you asked, and you will not notice - because nobody remembers the times chance did them a favour.

In short

• A stop loss is a level that triggers an order, not a guaranteed fill price.
• Slippage happens when there is no buyer at your price - not when somebody decides to punish you.
• Its biggest occasions are known months ahead, and they are all on the calendar.

Which is why everything that happens in the account is published here as it happened: a position that closed at a worse price than was written is published at that price, not at the one it was supposed to close at.