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I have a question about Stop Loss order - the automated closure of active trading position. It is well known that next candle almost always gets opened on EXACT price level where previous candle closes. But here is one exception: time period where there is no trading. E.g. weekends (except brokers allowing to trade on weekends) and holidays. Perhaps also rare situations of servers being under maintenance. In such cases next candle may necessary open where previous closes but it can either above or below previous one's closure. This is obviously called a gap.

Lets say I have Stop Loss (or even Trailing order) activated but when trading hours start again, the opening of first next candle goes beyond the Stop Loss. The term ''beyond'' means downward if I am in Long position or upward if I am in Short position. The unwanted direction. So that the first candle, after a ''break'' (no trading time), opens on completely different price level than previous candle closes.

My question is: where exactly will my active trading position get automatically closed? Will it get exactly on Stop Loss or Trailing level or on the opening of first candle that occurs after no trading time?

Please let me know if your answer depends on anything, e.g. broker, trading instrument (e.g. USA stock, nonUSA stock, material, option, commodity, cfd, bitcoin, currency pair, and so on), which trading asset is being traded etc.

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halfer
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Andrew0
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1 Answers1

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The question is definitely not about trading, but ok.

First:
it is not so difficult to test it on your end - find a weekend with gap and open a deal on Friday evening to catch a gap in Strategy Tester MT4.
Second:
Broker cannot close your deal at your price of stop loss if they do not have such price. They 'wake up' on Monday midnight (or close to it) and when you can see first candle of the week, that is the price they will check if they need to close your stoploss. It is possible that there are many different stop loss and stop pending orders from different clients and liquidity is low, that is why it is possible that they would not close your deal at the open price of that candle, but at the M1 low/high first candle - practically that happens quite often when you see a gap, same as closing at open of the candle (plus spread if closing short orders, and spread might be quite large too!!!). Usually brokers notify about such situations when you accept the public offer (ok, I know nobody reads it but they spent time on writing it).

This is about FOREX and Commodities, I cannot tell you anything about US and non-US Stocks

user3666197
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Daniel Kniaz
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