TRIED & TRADED
← Field guide · what went wrong

We argued with the trader, and the trader was right

  • Twice in three weeks our own software described a stop loss in words that were wrong.
  • The maths was right both times. That is what made it dangerous.

The first one: a label that promised protection it did not give

  • The software offers a ladder of stops, from 20% up to 300%.
  • We labelled the 100% rung “max loss”, and rungs above it “past max loss”.
  • On a debit trade that reads correctly — what you paid is what you can lose, so 100% of it is the whole risk.
  • On a credit trade it is wrong by a factor of about eight.

The trader's reply, on 31 July: “What the hell? … There’s only ever a max loss on a spread.”

The number behind it

  • On the credit spreads we were capturing, a typical trade took in about $55 on a $5-wide spread.
  • The stake was $55. The maximum loss was $445 — the width less the credit.
  • So the whole ladder, 20% to 300%, sat between roughly a tenth and a third of the actual risk.
  • A control labelled “max loss” was firing at an eighth of it.

The second one: the same rule under two names

  • One screen called it “Stop at 1.5× credit received”.
  • Another called the same rung “stop 150% of what you staked”.
  • They are the same setting. A trader looking for the rule he trades could not find it, because it was not called what he called it.

On 18 August: “I cannot see exit stop at one point five times credit received… I just want standardised wording.”

And the two names disagreed about what 1.5× meant

  • One reading: close when the loss reaches 1.5× the credit — 150% of the stake.
  • The other: close when the price reaches 1.5× the credit — which is a 50% loss.
  • Two readings of one phrase, three times apart.
  • That is not a labelling preference. It is two different exits wearing one name.

What both have in common

Both times the arithmetic was correct and the words were not. Nothing computed a wrong number; the display told a reader the wrong thing about a right one.

  • A test would not have caught either. There is no assertion for “this label means what a trader thinks it means”.
  • Both were found by the person who actually trades, reading a screen and saying it did not match how he speaks.
  • Both were about a percentage with no stated base — the same defect, twice, three weeks apart.

The corrected wording, and the one that went

What it saidWhat it says now
The ladder“stop at 100% — max loss”“100% of the premium you staked”
The rung above“past max loss”“200% of the premium you staked”
The other screen“1.5× credit received”“150% of the premium staked” — the phrase was dropped
  • One scale now, everywhere: percent of the premium you put at stake. The credit received on a credit trade, the debit paid on a debit one.
  • Nothing was re-mapped. Both fixes renamed rows; not one rung moved.
  • The credit-multiple phrasing was retired precisely because it has two readings and the industry uses both.

Common questions

Is this not just a wording change?

It is exactly a wording change, and that is the point. The number a trader sizes against comes from what the label says, not from what the code computes.

Why not use percent of max loss instead?

Because it does not exist on every trade. A naked put has no maximum loss, and on a calendar the ceiling is a modelled number. What you staked is known exactly at entry on every structure there is.

Did anyone lose money because of it?

No. It is internal software and no test has published a result. What it would have cost is a strategy sized against a number that meant something else.

Would a test have caught this?

No, and that is worth saying plainly. Both were caught by a person reading a screen. There is no unit test for a label that is technically true and read the wrong way.

What changed

One vocabulary, on every screen and on this site: a stop is a percentage of the premium staked, and the stake is named next to it.

The credit-multiple phrasing is not used here at all — the stop loss entry explains why, and shows the same rung on both scales so a reader can convert.

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