Mechanism
- Every instrument has a minimum price increment (tick/pipette).
- Platforms round entries and stops to permitted increments.
- “Tight” stops often collapse into the same few grid points that everyone else uses.
Execution reality: the market you backtested is not the market you trade. Spreads are stateful, liquidity is time-of-day dependent, and fills degrade exactly when your stop becomes most sensitive.
- Track spread-to-ATR (or spread-to-range) as a live risk input, not a “cost”.
- When spreads widen, your effective stop tightens and your R:R collapses.
- If your edge needs perfect fills, your edge is mostly fictional.
How it kills accounts
Stop “precision” illusion → rounded stop becomes crowded stop → repeated stop-outs → “strategy doesn’t work” → overcompensation and overfitting.
How it kills accounts:
- Edge looks fine in backtest.
- Live spreads widen at the exact wrong moments.
- Stops trigger inside noise, so you widen stops.
- Same size + wider stop = silent leverage increase.
- A normal spike becomes structural damage.
Rule that survives
- Express stops in ticks (or pips) and align to the grid intentionally.
- If your setup requires a stop smaller than the grid noise, it’s not a setup, it’s a wish.
- Adjust sizing so your stop can be placed where it means something.
Rule that survives:
- Spread is a gate, not a footnote. If it’s abnormal, you don’t trade or you trade smaller.
- Assume worst-case fills in fast markets.
- Size is the adapter: reduce size before changing the stop model.
Example archetype
You design a stop 1.3 ticks away (conceptually). The platform rounds it. Now your stop is at the same place as everyone using “minimum stop.” You get clipped routinely.
Tell: if the trade only works when the spread is tight and price is smooth, it’s not an edge, it’s a regime bet.
Deep dive
Deep dive
Tick size is a microstructure constraint that quietly shapes everything:
- Where stops can exist
- How tight spreads can be
- How “smooth” the chart looks
If you ignore the grid, you end up trading imaginary precision.
Field checklist
- Measure spread before entering. If it’s abnormal, you’re trading the wrong product at the wrong time.
- If volatility expands, reduce size first. Don’t “solve” it by widening stops with the same size.
- Avoid the predictable liquidity holes: rollover, session open/close, first minutes after data.
- Assume your stop may fill worse than your entry. Price the worst-case, not the brochure.
- If you cannot explain where liquidity comes from, trade smaller.