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Until now, clients were able to speculate on the financial markets knowing that their trade was protected by a stop loss. The normal stop loss order is still available, and will be automatically added to all spread bets with the firm, however now, for added security, Financial Spreads are also offering Guaranteed Stop Losses.
Guaranteed Stop Loss or Normal Stop Loss?
As mentioned, Financial Spreads already offer stop losses, however these 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 5500, and you set your stop loss at 5480. Should the UK index gap and immediately drop to 5470, then your trade would be closed at 5470, rather than at 5480.
This is because the stock market index did not trade at 5480, and therefore the company did not offer the price level. The next available price that was offered was 5470, 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 5480, 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 5480, 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.
Spread Betting Guaranteed Stop Loss
Spokesperson for Financial Spreads, Adam Jepsen, says that the new function will allow clients to trade with greater confidence. “As well as offering narrow spreads, we’ve been working hard and have a major new addition on our trading platform: guaranteed stops,” he said.
“We take our customer feedback seriously and are very pleased to announce we are rolling these new [guaranteed stop loss] orders out due to popular demand.
“Guaranteed stop orders let investors trade with complete confidence that they will be protected against any market gaps or slippage by being filled at the price level they have specified.”
Further Financial Spreads Information:
Original article written 19-Oct-11
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
'Guaranteed Stop Loss', Review by D. Jones, last update: 15-May-12
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Risk Warning:
Spread Betting carries a high level of risk
to your capital and you can lose more than your initial investment,
it may not be suitable for all investors. Ensure you only
speculate with money that you can afford to lose and that you fully
understand the risks involved and seek independent financial advice where necessary.
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