Check the dangerous one first: a stop beyond your liquidation price
This is the least discussed and by far the worst outcome.
If your stop sits further from entry than your liquidation price, the order can never execute. **Price reaches liquidation first, the position is closed by the exchange, and the stop is cancelled with it.** You believed you had capped the loss at 5%; what you actually had was the full margin at risk.
High leverage makes this easy to walk into. At 20x the liquidation distance is a little over 4%, so a habitual 5% stop was decorative from the moment it was placed.
Establish where liquidation sits before deciding where the stop goes:
The order that works is: decide the loss you will accept and where the stop belongs, then derive position size and leverage from that. Opening first and deciding on a stop afterwards is how stops end up outside liquidation.
Which price triggers it
Most venues let you choose the trigger price: **mark price** or **last traded price**.
On mark price, a momentary wick on one venue will not trigger your stop. On last price, it will. Both are defensible choices; the problem is that most people have not noticed which one is selected.
"The candle clearly went through my stop" is expected behaviour if you are triggering on mark price and the mark never got there.
A stop-limit can trigger and never fill
This is the classic cause of "my stop triggered and I am still in the position".
**Stop-market**: triggers, then fills at market. It will fill; the price is not guaranteed.
**Stop-limit**: triggers, then places a limit order. If price gapped past your limit, that order simply rests unfilled while the market keeps moving against you.
Using a stop-limit in a fast market means attaching a condition that may be unsatisfiable to the exit you most need to happen.
Slippage: the trigger price is not the fill price
A stop-market order always fills, at whatever is available when it does.
In a thin contract, or when price gaps, the fill can land far from the trigger. That is not a venue failing — it is what a market order is. It guarantees execution, not price.
The effect grows with size, because a larger order consumes more of the book.
Without reduce-only, a stop can open a reverse position
If a stop order is not flagged reduce-only, it can do more than close your position — it can open a new one in the opposite direction.
The common route in: you manually closed part of the position but left the stop quantity unchanged. When the stop fires, the excess becomes a fresh short (or long). You believe you exited; you are still in the market, now facing the other way.
Flagging stops reduce-only costs nothing and removes the entire class of problem.
The order to check in
- Whether your stop or your liquidation price sits closer to spot
- Whether the trigger type is mark price or last traded price
- Whether the order was stop-market or stop-limit
- If it filled far from the trigger, the book depth and speed of the move at that moment
- Whether the stop is reduce-only, and whether its quantity still matches the position
A structural point
Most stop failures do not originate in the order settings. They originate in a position that was too large to begin with.
Higher leverage means a narrower liquidation distance, which means less room for a stop to live in. When liquidation sits 4% away, any stop wider than 4% is meaningless, and any stop much tighter is likely to be taken out by ordinary noise.
Decide how wide the stop needs to be, then choose leverage that leaves room for it. Reverse that order and the stop is reassurance rather than protection.
Note
This describes mechanics and is not trading advice. Trigger and fill are determined by the exchange at the time. Leveraged trading can lose your entire deposit.
