I have a spreadbetting platform with FXCM.
Error number 1.
...Lately my losing trades have been getting stopped out with more pips then originally set.
Partial consequence of error number 1 above.
...Today for example I was in a cable trade where I set a stop loss of 43 pips.
Error number 2.
...The trade was a loser but I got stopped out at 55 pips loss instead of the 43 pips originally set.
Partial consequence of both errors number 1 and 2 above.
...Since this has been happening very frequently whereby FXCM stops me out by atleast 7 pips more then I had originally set on my EURUSD and GBPUSD trades I wonder if anyone else has been experiencing similar problems.
Yes.
...With the spread being around 3 pips for both pairs I would expect to be stopped out at no more then 2 pips extra of my original stoploss figure.
Error number 3.
Losing over 7 pips more then what you originally set on a regular basis can be painful to one account.
Indeed it can.
Now, a little bit of error fixing:
a) Run (don't walk) to a Retail Forex Intermediary with the most direct access to genuine Interbank rates that you can find. With a little homework, you will find them - they DO exist. You do not need a Dealing Desk and you most certainly don't need a Dealing Desk while messing around with SBs. This fixes Error Number 1.
b) Trading the Forex using Stops is one problem. Trading the Forex using 43 pip Stops compounds the error. GBP (on average) produces approximately 1.4 times the magnitude of EURUSD. If EURUSD moves 100 pips, then GBPUSD will typically (not always) move 140 pips. You can't just walk into this market and think that all currency pairs have the exact same price action dynamics - they don't. Think of the Forex pairs the same way you would a Baskin Robbins Ice Cream store. Each pair has its own flavor, its own price action tendency, its own range and magnitude.
The Forex is one of the most dangerous places for naked trading. Stop Hunting is
real - don't let anybody tell you otherwise. Anytime a Dealing Desk can manipulate your position when your trade comes
close to your stop without touching it, by "expanding the spread" through your stop location, that is considered a hostile trading environment for the uninitiated. When there is no Dealing Desk intervention, there is no implicit Stop Hunting by your Intermediary, though collective, the "Interbank Players" knows the location of Stop Cluster Levels.
To mitigate risk, get away from trading single pair positions, unless you have mastered the art and science of hyper-short-term Scalping. Learn for your self, how to stack the deck in your favor by using a Multi-Pair Position strategy that uses no
visible stop and no
immediately visible limit. Again, unless you are very adept at hyper-short-term Scalping, then you really should seriously consider being less of a Trader and more of a Money Manager across a Multi-Pair Position trade profile. How you go about doing that, is of course, up to you - as there are many ways to engineer such profiles. This fixes error number 2.
c) The market for SB is growing, but unless you like dealing on your Intermediaries deal book, then try sticking to the underlying unless or until this particular derivatives market shows that it is universally accepted as a prime derivatives market place. SBs and CFDs are NOT equity derivatives and the two should not be confused. FX is OTC anyway with a litany of bad price representation through unethical Intermediaries who target inexperienced traders. So, why take more systemic risk by trading either SB or CFD, where it is guaranteed that streaming prices AND spreads will be manipulated or stand the chance of being strongly manipulated. The first order of business of Risk Mitigation, which in this market niche means doing whatever you can to stack the deck in your favor. This fixes number 3.
If you are not a cold, calculated and highly disciplined Professional Scalper, then 43 pips on Cable is not even remotely functional. In fact, its is laughable. My Cable position just swung on my by 149 pips in less than 24 hours. If I was naked (a single pair) or had stop of 43 pips, I would have been eaten alive by now. Yet, I am still up 12 pips on Cable and averaging 52 pips in the aggregate through a Multi-Pair profile with
no stop anywhere in sight.
Take the time to learn how to conduct yourself in this business and it can pay huge dividends for you in return.
