Guaranteed Stop Loss Guide

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?

Financial Spread Betting Orders
Regular stop losses do not guarantee the level where your trade will be closed if the market ‘gaps’.

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 Comparison

Which spread betting companies offer Guaranteed Stop Loss orders.

  Financial Spreads IG City Index ETX Capital
Stop Losses Available? Financial Spreads: Stop Loss Orders Available? IG: Stop Loss Orders Available? City Index: Stop Loss Orders Available? ETX Capital: Stop Loss Orders Available?
Guaranteed Stop Available? Financial Spreads: Guaranteed Stop Loss Available? IG: Guaranteed Stop Loss Available? City Index: Guaranteed Stop Loss Available? ETX Capital: Guaranteed Stop Loss Available?

AuthorAlex Turner

Senior Editor, SpreadBetMagazine