Direct answer
A Fixed Stop is a stop-loss order type where the stop level is set to a specific price (or a specific distance translated into a price) relative to the trade entry. The key idea is that the stop level does not adjust automatically as price moves; it stays fixed once placed.
This article includes one worked numerical scenario. It also states every assumption used in the calculations, then highlights limitations and failure modes you can verify in your own trading or documentation.
How the fixed stop mechanism works
Start with a few definitions:
- Entry price: the price you execute the position at.
- Stop level: the price condition that makes the stop order trigger.
- Long position: profit rises when price rises; loss grows when price falls.
- Short position: profit rises when price falls; loss grows when price rises.
For a long trade with a Fixed Stop, you typically set a stop level below the entry. When market price reaches or crosses that level, the stop order triggers an exit attempt. The exact executed exit price can differ from the stop level because actual execution depends on liquidity, speed, and market conditions.
Inputs you must decide
To set up a worked example, you must choose:
- Entry price.
- Stop distance (for example, “50 pips”) or directly the stop price.
- Position size assumptions (so you can compute money impact).
- Costs assumptions (spread/commission). If you do not assume them, the result is incomplete.
Worked example with transparent assumptions
Scenario
Assume a trader opens a long forex position with these fixed assumptions:
- Pair: EUR/USD.
- Entry price: 1.1000.
- Stop distance: 50 pips.
- Pip size: for EUR/USD, 1 pip = 0.0001.
- Stop level: entry minus 50 pips = 1.1000 − 0.0050 = 1.0950.
- Position size for calculation: 1.0 standard lot.
To keep the example verifiable, we need one more assumption:
- Money per pip: assume $10 per pip for 1.0 standard lot on EUR/USD.
Now assume execution behaves in the simplest way:
- Execution assumption A (ideal): when triggered, the order closes exactly at the stop level (1.0950).
Calculation (ideal execution)
- Price move from entry to stop: 1.1000 → 1.0950 is 0.0050.
- In pips: 0.0050 / 0.0001 = 50 pips.
- Estimated loss: 50 pips × $10/pip = $500.
Same scenario with a common real-world limitation
Now change only one assumption:
- Execution assumption B (non-ideal): at trigger time, the exit fills at 1.0946 instead of 1.0950 (a worse price for the long).
Recalculate:
- Move: 1.1000 → 1.0946 = 0.0054.
- Pips: 0.0054 / 0.0001 = 54 pips.
- Loss: 54 × $10 = $540.
This demonstrates an important separation:
- Fixed Stop level is a trigger condition.
- Final loss depends on the actual fill price at execution time.
Material limitation / failure mode you should expect
Even if the stop level is fixed, outcomes can deviate because:
- Slippage: the fill price can be worse than the stop level.
- Spread and costs: the effective entry/exit economics can differ from a clean “price-only” calculation.
- Gaps or fast moves: if price jumps over the stop level, the first available fill may occur far beyond it.
You can verify these in a provider’s execution policy or by reviewing historical trade reports for stop orders, without assuming a guaranteed match between stop level and final fill.