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

Airbnb cleaning service Arlington Heights ..
In The News:

Red flags like processing fees, urgent countdowns and requests for full Social Security numbers expose fraudulent settlement sites targeting consumers.
Comprehensive analysis of Google Maps, Waze and Apple Maps examines usability, routing accuracy, data handling and features across the top navigation platforms.
Expert analysis reveals whether wired Ethernet or wireless Wi-Fi connections are safer for home internet use, plus practical steps to secure your network from attackers.
Australian construction robot Charlotte uses sand, crushed brick and recycled glass to 3D print fireproof, floodproof homes with reduced carbon footprint.
Cybercriminals are using fake invitation emails to trick recipients into downloading malware and stealing personal information and data.
Flying drones could help retailers fight a 93% increase in theft rates as Flock Safety promotes airborne security systems to track suspects and deter crime.
The Fox News Artificial Intelligence Newsletter brings you the latest news on the emerging technology every Saturday, highlighting top stories.
Hacker group Radiant stole data from 8,000 children at Kido nursery chain, demanding ransom and directly contacting parents with intimidation tactics.
As 18 states implement bell-to-bell cell phone bans, creative students use Google Docs, iMessage on MacBooks and Post-It notes to stay connected in class.
A sheriff's captain says deputies often spend hours writing reports between calls, but Axon's AI program, Draft One, helps them save crucial time in the field.
Sora 2, OpenAI's new video-generation app, can create AI-generated videos based on a singular prompt. The results are both mind-blowing and terrifying.
iPhone and Android users can reduce Wi-Fi calling battery drainage through settings adjustments, background app limits and stronger Wi-Fi connections.
Work email scams are becoming harder to detect as criminals use AI and spoofed addresses to trick employees into opening malicious attachments and links.
From her Arizona living room, Christina Chapman ran a covert hub that helped North Korean operatives infiltrate U.S. firms, netting $17 million in stolen salaries.
UC Santa Barbara researchers developed a soft robotic intubation system that achieved 100% success rates for experts and 96% for paramedics with minimal training.
Scammers exploit probate filings to target grieving families with fake fees and debts, Kurt "Cyberguy" Knutsson reports.
Automotive giant Stellantis becomes latest victim of widespread Salesforce breaches affecting companies like Google, Cisco and Adidas this year.
A woman from Washington reunited with her missing Maine Coon cat Louie after 11 days using Love Lost, a free AI-powered pet recovery platform.
Expert cybersecurity tips help Mac owners remove malware infections and strengthen defenses with antivirus software, password managers and system updates.
Meta's AI chatbot training rules bans sexual roleplay with minors and block access to child abuse material as regulators scrutinize its safety measures.
Online banking users face a new threat: web injection scams that overlay fake pop-ups to steal logins. Here’s how to spot them and protect your accounts.
Meta introduced Teen Accounts to Facebook and Messenger while launching a School Partnership Program for U.S. educators to report bullying within 48 hours.
Executive order signed by President Donald Trump tasks Robert F. Kennedy Jr.'s MAHA Commission with using AI to find new cures for childhood cancers.
New FileFix attack tricks Facebook and Instagram users into running malicious PowerShell commands disguised as Meta account maintenance to deploy StealC infostealer.
Step-by-step instructions help users migrate to Windows 11 while preserving emails, contacts, documents, and software licenses during the transition.

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

A Guide to Using Stop Loss Orders Stop losses are... Read More

Why This Bear?

People are constantly asking me why is the stock market... Read More

Can?t Stand The Heat

It seems that every day I turn on the TV... Read More

10 Tips For Creating Wealth From the Stock Market

1. Do not spread your money too thin.My friend has... Read More

Online Broker Trade History Not Doing the Job

Let me start by saying that...Most online brokers do not... Read More

Time Out

Are you paying any attention to your retirement savings? Do... Read More

Whos Calling?

Its dinnertime and the phone rings. It's Joe Noname with... Read More

I Love You, Warren Buffet

Sometime around 1980, can't remember exactly, there was a flight... Read More

The Stock Market - How Just One Question Will Tell You All You Need To Know About Your Stock Broker

Last time we looked at the real performance of the... Read More

No Load Mutual Funds: Investment Hype vs. Investment Help

With the internet such a huge part of our daily... Read More

Is The Bear In The Cage?

For the last few weeks we have seen the stock... Read More

What To Buy Now

I am sure that if you have a brokerage account... Read More

High Price/Earnings Ratios and the Stock Market: a Personal Odyssey

After some forty years of banking and investments, I retired... Read More

Bargain Basement - Finding Stocks That Go Up

Have you been listening to the talking heads on CNBC-TV?... Read More

The Secret Art of Backtesting

If you have not back tested your trading system, you... Read More

Choosing An Investment Stock Broker

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

What is a Mutual Fund?

Ever wondered what is a mutual fund? A mutual fund... Read More

Smart Day Trading Strategies to Help You Make Money in the Stock Market

Stock trading can be a very profitable activity. You can... Read More

Mutual Fund Ball and Chain

The broker told me not to sell because the mutual... Read More

Being Wrong Buying Stock is Okay

Being wrong is OK, but let's not carry it to... Read More

My Stock - Right or Wrong

We all know the expression, "My country, right or wrong",... Read More

Stock Trading Secrets?

How often have you come across an advertisement or e-mail... Read More

Valuation

Every day I hear from the "experts" on CNBC-TV and... Read More

Mutual Fund Honor Roll ? Buy High, Sell Low by Chasing Performance

Buy high and sell low -- It's not a typo.Millions... Read More

Investing in Stocks and The Game of Monopoly

To begin, you might look at playing the stock market... Read More

reliable maid service Winnetka ..