News releases and the daily loss limit on gold: spreads, slippage and gaps — what to work out before the release
Many daily loss breaches on gold do not come from a bad idea. They come from a few seconds around a scheduled release, when the price jumps, the spread widens and a stop fills well beyond where it was placed. The loss that lands on the account is then larger than the one that was planned, and on a challenge or funded account that difference comes straight out of the daily limit. Here we explain what happens to price and orders around high-impact news, how to put a figure on it before the release, and what to check in your own rules. Rules differ by firm and by account type; always read your own.
What happens to the price in the first seconds
Around releases such as US jobs data, inflation figures or a central bank rate decision, liquidity thins out just before the announcement. Market makers widen their prices, so the spread on gold can grow from a fraction of a dollar to several dollars for a short time. When the figure is published, the price can move several dollars in a few seconds, sometimes in both directions within the same minute.
Why a stop can fill worse than placed
A stop-loss is an instruction to close at the next available price once the stop level is touched; it does not fix the exact price of the fill. In a fast market the next available price may already be well past the level. The difference is slippage, and it is counted in the result like any other loss.
A simple example with round numbers. On gold, the value of a 1-dollar move depends on how many ounces the position holds; the contract specification on your own platform shows the size, as it differs between brokers. A trader holds a position of 50 ounces with a stop 5 dollars away, a planned loss of 250 dollars. During the release the stop fills 4 dollars further than placed. The actual loss is 450 dollars, almost twice the plan.
On an account with a daily limit of 3,000 dollars, a single fill like this may not breach the rule. Two or three of them in one session, or one with a larger position, can.
Gaps over the weekend and at the daily break
The same thing happens without any news when the market reopens after the weekend or after the daily break, if the opening price is far from the last close. A position held through the gap is closed at the first available price, whatever the stop level was.
Working out the worst case before the release
Before a scheduled release it helps to write down three numbers in money terms:
- The planned loss of each open position at its stop.
- An allowance for slippage, for example a few dollars per ounce on gold, multiplied by the position size.
- The room left today: the daily limit minus today's loss so far, including floating losses on open positions.
If the first two together come close to the third, the position is larger than the rule allows on that day. Common answers are to reduce the size, to close before the release, or to wait until the first reaction has settled and spreads have returned to normal.
A short checklist for news days
- Which releases are scheduled today, and at what time on the broker's server clock?
- Does your firm restrict trading around news on this account type, and for how many minutes before and after?
- Do floating losses count towards the daily limit on your account?
- How much room is left today, in money terms, before the first trade?
- What size keeps the worst case, with slippage, well inside that room?
Where a daily lock fits in
A daily loss lock handles one part of this: it stops trading for the rest of the day once today's loss reaches the figure the trader sets. Our free MetaTrader 5 utility, Spectar Daily Loss Limiter, does exactly that, counting the day from the broker's server midnight and including floating losses. It cannot prevent slippage on a single fill, so a personal daily figure set well inside the official limit leaves room for a release that moves faster than planned.
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