The Importance of Using Stop Loss Orders When Spread Trading the Financial Markets

A Guide to Using Stop Loss Orders

Stop losses are market orders designed to allow you to limit your losses.

When you place a stop loss you are instructing the spread betting company or stock broker to cut your position when it reaches a certain loss level (or in some cases, profit level - more later).

Therefore, a stop loss will automatically close your trade if the market reaches a certain point.

For example: You have bought ?1 a point of the German DAX at 4200. The most you are willing to risk is ?150 on this trade so you place your stop at 4050. If the market trades at 4050 you are taken out immediately and you lose ?150.

Normal Stop Losses

These are free but with this type of stop you can sometimes lose more than you specified when you placed the order.

Sometimes your stop loss order may not be filled at the level you wanted i.e. you may be taken out at 4046 instead of 4050.

The bookmaker will attempt to get you out of the trade at the price you specify but when the market is moving very quickly it may not be possible.

This is called "slippage" and tends to happen in a fast moving market.

You can also lose more than you wished if the market you are trading "gaps".

For example: You have opened a long trade on the Dow Jones for ?1 a point at 10000. As you were willing to risk ?200, you placed a stop at 9800. Over the next couple of days, the Dow moves down slightly to 9900 and at the end of trading on the third day it is sat at 9890.

The next day some very disappointing economic figures are released and the Dow opens well down at 9700. As this is past your stop loss, the bookmaker closes your bet at market price.

Your trade is closed at 9690, 110 points below your stop loss so your loss is now ?310 rather than the ?200 you were willing to lose.

Guaranteed Stop Losses

You can ensure you are closed out at the exact price you specify by using a Controlled Risk or Guaranteed stop loss order

These types of stops are designed as a type of insurance to guarantee that your stop loss order is filled at the exact price you specify.

Even if the market you are trading gaps 1000 points beyond your stop, if you are using a guaranteed stop loss you will still only lose what you have already decided is an acceptable loss.

You pay a little extra for a guaranteed stop. In the Dow example above, a guaranteed stop would cost roughly 4 times the stake (4 x ?1 = ?4). Usually the premium is taken from your account balance when setting the stop loss level or is added to the spread.

Although they do reduce your account balance, guaranteed stops can save you a great deal of money and are certainly recommended if you have a small capital base.

Some Pointers About Stop Losses

- Never move your stop if you think it may be hit. If you move the stop further down to try and avoid being taken out you will simply lose more money.

- You don't have to close your entire position with a stop loss order. If you wish, you can set up 2 or more stops. For a ?1 per point trade you could set a stop 100 points away which reduces you exposure by 50p a point. Another could be placed 200 points away to take you completely out of the trade.

- It is better to let the stop take you out of the market and preserve the rest of your capital than to try and stay in the trade by moving the stop.

- You can lock in profits by using a stop loss. If you were to enter a long trade on the Dow at 10000 with a stop at 9900 and the Dow moves up to 10200 you could then move your stop to 10100 to lock in 100 points profit.

- Never trade without a stop loss, even if it is just a normal stop. To stay in the trading game you must preserve your capital and huge unexpected losses will certainly not help. See the Money Management section for more details.

Ben Catt is an active financial trader and runs a free website containing hints, tips and information about tax-free financial spread trading and betting in the UK. The site can be found at http://www.financialspreadtrading.co.uk. He also runs a business opportunity information site - http://www.financialspreadtrading.co.uk

recurring maid service Buffalo Grove ..
In The News:

The iconic Mary Kay pink Cadillac goes electric with the Cadillac Optiq, available only to the company's top 1% of sales force performers.
Cybercriminals abuse trusted Intel driver to gain kernel access and shut down Windows Defender, enabling undetected malware deployment since July 2025.
Using email aliases for online shopping and subscriptions can protect your privacy by preventing companies from linking your activity across websites.
New research shows AI overlap does not equal job replacement, with knowledge-based roles seeing most integration while physical jobs remain least affected.
Scammers target seniors who avoid social media by exploiting public records like obituaries and real estate filings to steal personal information and money
Recovery team in Italy use AI-enabled drones to detect missing hiker's red helmet, leading to successful recovery after months of ground searches
Google Salesforce system breach exposes business data while scammers use incident to target users with fake security calls and phishing attempts.
Google announces Pixel 10 lineup with Tensor G5 chip and Gemini Nano AI, introducing Magic Cue, Pro Res Zoom up to 100x and satellite emergency support features.
C San Diego study reveals 86% of school safety companies monitor students 24/7 on personal devices, raising privacy concerns.
Users can now add their favorite outlets' coverage to the Top Stories section of Google search results by utilizing the 'preferred sources' feature. With just a few clicks, you can add Fox News.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
Interstellar object 3I/ATLAS shows an unexpected frontal glow that Harvard's Avi Loeb says cannot be explained by sunlight reflection or standard cometary outgassing.
Receiving order confirmations for purchases you never made could mean your email address is being exploited in fraud operations targeting multiple retailers.
First wireless brain implant works with Apple's official protocol, enabling hands-free control of iPhones, iPads and Vision Pro through thought alone.
Data brokers sell personal details that scammers use to target retirement funds through fake financial advisor calls and convincing phishing attempts
Ten innovative tech solutions from gait sensors to smart pill dispensers help adults 65+ track fall risks and prevent injuries before they happen.
Meta AI internal documents revealed chatbots were allowed to flirt with children and engage in romantic conversations until the company was exposed by Reuters.
ChatGPT will avoid giving direct mental health advice under new OpenAI rules following instances where the AI model provided harmful or misleading responses.
Your phone tracks you in more ways than that little GPS icon suggests. Here’s how to find and clear hidden location logs on iPhone and Android.
Authorities in France and the Netherlands have been notified. Meanwhile, impacted customers are being told to stay alert.
Apple just rolled out a redesigned Blood Oxygen feature to specific models, following a recent victory in a legal dispute.
Kidney dialysis provider DaVita experienced a ransomware breach by the Interlock gang affecting 916,000 people in the second-largest U.S. healthcare attack of 2025.
A Chinese-made Unitree R1 robot walked Manhattan streets and shopped for shoes as part of KraneShares' $28 million AI robotics fund promotion campaign.
The ShinyHunters cybercriminal group breached Google's Salesforce system through vishing attacks, stealing business contact details and customer data.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Hot Stock Investing ... How to Pick Hot Stocks with Momentum Stock Trading

Profitable day traders recognize that momentum trading is among the... Read More

Why Buy and Hold?

Since I can remember, and that's a long time ago,... Read More

Choosing An Investment Stock Broker

If you want one.And I don't recommend any broker with... Read More

Bull or Bear?

Cat or dog? Maybe Zebra. Shucks, I don't know, but... Read More

Money, Insanity and Wall Street

Money: the most charged word in the planet. It means... Read More

Stock Market Insanity

Let's first define insanity. It is doing the same thing... Read More

Do You Know What is the Single MOST Critical Mistake in Trading the Stock Market??

Well maybe that's overstating it a little, but it's certainly... Read More

Where Is The Beef?

Where is the beef? Or maybe it should be where... Read More

Red, Green, Yellow - or - Stop, Go, Go Very Fast: Which Describes Your Online Trading?

Ever notice how behavior in one area of life can... Read More

Good News?

As the man said, "I've got some good news and... Read More

Stock Market Investing: Knowing When (and when not) to Sell

One of the greatest challenges of investing in stocks is... Read More

Kick The Tires

Before you buy another car you walk around the lot,... Read More

The POWER of a Proven Stock Investment Plan

When you invest in the stock market for ever-increasing cash... Read More

A Funny Thing Happened on the Way to the Stock Market

On the 40 year journey through the turmoil of a... Read More

Hold Em and Fold Em

When most analysts, financial planners, fund specialists and investors try... Read More

Trading Tips No 5: Stock Trading Curve Drawdown and Commitment

All stock trading and investing methods must deal with the... Read More

Stock Trading Success

The ABC's of Stock Trading SuccessStock trading success...why is it... Read More

A Good Fund Manager

Every Wall Street analyst, financial planner and broker will tell... Read More

The Stock Market Doesnt Care if You are a Beginner?. Get Prepared to Succeed at Trading

Stock trading remains a very competitive field and the stock... Read More

Protectionism

First let's see what protectionism is. According to Mr. Webster... Read More

Learn to Calculate a Stock?s Pivot Point

Stocks breakout from properly formed bases everyday but many investors... Read More

NASDAQ 800?

In November of 2000 when the NASDAQ was trading at... Read More

Mutual Funds are Dead

You may have wondered why your mutual funds have been... Read More

Stock Market Investing Odds

The greatest stock market myth is the idea that investing... Read More

What the SEC Really Thinks About Mutual Funds!

Let's go into the details of why non-indexed mutual funds... Read More

premium house cleaning Glenview ..