Guaranteed Stop Loss or Normal Stop?
Investors can speculate on the financial markets knowing that their trade is protected by a stop loss (if… they add a stop loss to their trades).
While the normal stop loss order is available, for added security, spread betting firms also offer Guaranteed Stop Losses.
Guaranteed Stop Loss or Normal Stop Loss?
For example, if you buy the FTSE 100 at 6500, and you set your stop loss at 6480.
Should the UK index gap and immediately drop to 6470, then your trade would be closed at 6470, rather than at 6480.
This is because the stock market index did not trade at 6480, and therefore the company did not offer the price level.
The next available price that was offered was 6470, and therefore your trade would be closed at that level.
Let’s take the same example, however instead of using a regular stop loss order at 6480, you add a guaranteed stop loss order at the same level.
If the UK 100 index were again to gap and drop to 5470, your trade would be closed at 6480, because your stop loss was guaranteed.
Financial spread betting investors should note that as Guaranteed Stop Orders are a form of insurance against market gaps they come at a small extra cost.
Firstly, there’s a small premium you have to pay for selecting your Stop Loss to be guaranteed and, secondly the order needs to be placed further away from your entry level than if it was a normal non-guaranteed stop.
Guaranteed Stop Loss ComparisonWhich spread betting companies offer Guaranteed Stop Loss orders.
|Stop Losses Available?|
|Guaranteed Stop Available?|
Remember: Spread betting, CFDs and forex trading carry a high level of risk. You can lose more than your initial investment. These products are not suitable for all investors. Only speculate with money that you can afford to lose. Make sure you fully understand the risks involved and seek independent financial advice where necessary.