Why My Position Gets Closed Even When Price Did Not Reach It?

There are 4 types of Market Orders:

For long (buy) positions

• Limit orders to buy will be executed at the ASK price.
• Stop-loss and take-profit orders for long positions will be executed at the BID price.

For short (sell) positions

• Limit orders to sell will be executed at the BID price.
• Stop-loss and take-profit orders for short positions will be executed at the ASK price.

Limit Orders are for Entries

In both long and short positions, the execution of orders follows the principle that limit orders are executed at prices aligned with entering the market.

Stop Orders are for Exits

While stop-loss and take-profit orders are executed at prices aligned with exiting the market.

BID vs ASK Price

What BID prices are used for?

The BID price is used for exiting long positions and entering short positions.

What ASK prices are used for?

The ASK price is used for exiting short positions and entering long positions.

The discrepancy between the default chart price (it displays the BID price) and the execution price (which can be either bid or ask) can lead to confusion and misunderstanding among forex traders.

This is a critical aspect of trading that traders need to be aware of, as it affects how orders are executed and their potential outcomes.

The price that prints on the chart is always based on the Bid price; therefore, when a trader gets stopped while, the price never reaches a certain level.

This is because the trader was stopped because the ASK price hit the stop loss, OR the ASK price never reached the pending order in cases where the trade misses an entry or a Take Profit. 

This happens when a trade has a sell position open and gets stopped out due to the ask price hitting the stop loss.

This also happens when a trade misses a take profit level of a sell position. If the ASK price does not reach the take profit level, then the trade will not be filled, and the trader will miss exiting at the take profit level.

We will expand on this in the next section, “the importance of understanding the Bid-Ask price difference.

Market Rollover Time: Wider Bid and Ask Spreads

“Rollover” is the process of extending the settlement date of an open position when it reaches its value date. Essentially, if a trader decides not to close a position by the end of the trading day, that position is “rolled over” to the next trading day. Rollover typically happens at the end of the trading day at 5 PM EST.

During rollover time in the forex market, traders often observe a phenomenon where spreads tend to widen.

Rollover is a time when the liquidity of the market can momentarily diminish. As banks and institutional traders reconcile and rollover their positions to the next trading day, the reduced liquidity and increased uncertainty can lead liquidity providers to adjust their spread offerings as a protective measure.

This widening of spreads acts as a buffer against potential market volatility and erratic price movements. Traders should exercise caution when placing or holding trades during this period to avoid unexpected slippage and costs.

Spread on Major vs Non-Major Pairs

Non-major pairs, which already have inherently lower liquidity than major pairs, can experience a significant drop in available buyers and sellers. This reduced liquidity can cause the bid and ask spread to widen as there are fewer active participants to take the other side of a trade.