Notes

Spread Betting - Stop Losses Orders or Guaranteed Stop Loss Orders
A stop loss is a tool that should be used by everyone who trades stocks on margin through spread bets. The stop loss order cuts your spreadbet at a predetermined point you specify when you start the trade. Setting a stop loss provides downside protection and allows you to calculate the loss you are prepared to take on any one trade.

In spread betting a stop loss can also act as a means of locking in profit near the price point you wish the trade to be closed, if the stock is not performing. To lock in more profit, adjust the stop loss level as your stock gains profit. The stop loss will be executed and closed when the share starts to track back (up or down, depending on how you trade).


So for instance if you open a long spread bet on PV Crystalox Solar plc [PVCS (London)] stock which is trading at 70p with a stop loss order at 65p and PVCS falls in price the bet is closed at 65p (for a loss). http://wmfs.info/blackjack-basics/ When protecting your trade with a stop loss order, you will sometimes be stopped out a little away than the exact point you set it at, therefore resulting in either a little less profit or slightly bigger loss. This is because a stop loss takes a few seconds to close out the trade, by the time this process has completed and depending on how volatile the trade is, then you will be closed out near the actual stop.

While a stop loss is useful in limiting losses it is not foolproof. Let's say PV Crystalox Solar plc (PVCS: London) were to issue a surprise profit warning and the share price immediately fell from from 70p to 58p immediately in one sweep. Your stop loss would be broken here and your spreadbet would close at 58p instead of 65p, since the stock has never traded at 65p.

To protect against this occurrence spread betting providers offer a solution in the form of a 'guaranteed' stop loss for an additional small premium. If you want to make sure that your spread betting trades get stopped out at a definite point then you can use a guaranteed stop loss order. This is fundamentally the same as a stop loss order, except you will be closed out at the point you requested, no matter how volatile the stock is. This fee varies from broker to broker. Most common is a change to the initial spread. This can mean adding a few more points either side, or charging a percentile fees. These fees are based on trade type and trade value. They are taken from your account margin. The amount of risk you are willing and able to take depends on your tolerance for it. However, in highly volatile markets like these, a guaranteed stop-loss order can be a great idea.

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