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  • Closing Orders

    Closing Orders

    Closing Orders are orders that automatically close out an open trade once a level specified by you is reached or triggered.

    You can use closing orders to lock in profits by automatically closing a trade at a better price than your entry level or for stopping losses, by automatically closing a trade at a worse price than your entry level.

    There are four types of Closing Orders:

    Standard Stop Loss Order: An order that stops your losses on an existing trade by closing it at a level that is worse than your entry point. This order may close your position at a worse level than you specified, in the event of market gapping. (See Stop Loss Order Warning below.)

    Guaranteed Stop Loss Order (GSLO): An order that stops your losses on an existing trade by closing it at a level that is worse than your entry point. This order is closed at the level you specify regardless of market volatility or gapping.

    Limit Order: An order that locks in your profits on an existing trade by closing it at a level that is better than your entry point.

    Trailing Stop: A stop order that trails your position (when it moves favourably), only executing when the market turns against you by a specified number of points.

    Standard Stop Loss Order Example

    Say you want to go long and buy the Wall Street DFT at a £10 stake and want to limit your losses to £100.

    You attach a Closing Standard Stop Loss Order 10 points below what you buy the market for – limiting your losses to £100, i.e. £10 x 10 = £100

    In the event the Wall Street DFT falls 10 points from the price at which you bought it, your Closing Standard Stop Loss Order will be triggered and the order executed – closing out your trade at the best available price.

    Alternatively, say you want to go short and sell the Wall Street DFT at a £10 stake but still want to limit your losses to £100.

    You attach a Closing Standard Stop Loss Order 10 point above what you sell the market for, limiting your losses to £100.

    In the event the Wall Street DFT rises 10 points from the price at which you sold it, your Closing Standard Stop Loss Order will be triggered and the order executed – closing out your trade at the best available price.

    Stop Loss Order Warning: A Standard Stop Loss Order cannot guarantee your trade is closed out at your requested price during a period of market gapping. Instead, your order will be triggered and your trade executed at the best available price our systems can get you. This can be at the same but when the market is highly volatile or in the event of market gapping, this could be a worse price than the level specified by you.

    In cases of severe gapping, the execution price may be at a substantially worse price than your Order price.

    Tip: Avoid unwanted additional losses and use a Guaranteed Stop Loss Order (GSLO), explained below.

    Guaranteed Stop Loss Order (GSLO) Example

    A Guaranteed Stop Loss Order (GSLO) is similar to a standard Stop Loss Order (above) but guarantees that the price at which an order will be executed is the exact price specified by you, regardless of any gapping in the market. A GSLO therefore offers maximum risk management protection, even in volatile markets.

    Tip: If you use a GSLO on all of your trades, you cannot lose more than the funds you have in your account.

    In this example, say you want to go short and sell the BT DFT market for a £10 stake and you want to guarantee that you do not lose more than £100.

    You attach a Guaranteed Stop Loss Order (GSLO) 10 points higher than your sell price.

    In the event that market gapping occurs and the market opens the next day 15 points higher, following positive data from the company overnight, your trade will still be closed out and your closing order executed at 10 points above what you sold the BT DFT market for – even though the share price opened far past this level during trading hours.

    Guaranteed Stop Loss Order Warning: Guaranteed Stop Loss Orders are not available across all our markets and incur a small fee. Please see the market information sheets located in our Range of Markets section for more information.

    Trailing Stop Orders

    Trailing stops are a powerful risk management tool, helping you to minimise potential losses, without setting a limit on your potential gains.

    A trailing stop is created by setting a stop order that ‘trails’ your position by a specific number of points. If your trade moves in your favour, the trailing stop moves with the market, executing only when the market moves against you by the set number of points.

    A Sell trailing stop would be placed a fixed number of points below the market price. As the market price rises, the stop price rises too, ‘trailing’ the market price by the specified number of points. Should the price fall, the stop price holds, and a sell order is submitted once the stop price is hit.

    Buy trailing stop orders are the mirror image of Sell trailing stop orders, and are most appropriate for use in falling markets.

    The trailing stop is more flexible than a fixed stop loss, since it automatically tracks the market’s price direction and does not have to be manually reset, as you would have to with a fixed stop loss.

    Trailing Stop Order Example

    Say you open a spread bet to buy the UK100 at 6500 with a £10 stake and want to limit your potential losses to a maximum of £300 (without impacting potential gains). You attach a trailing stop 30 points away at 6470, limiting your losses to a maximum of £300, i.e. £10 x 30 = £300.

    The UK100 rises in value, hitting a high of 6750 - the unrealised profit on your trade is now £2,500. Your trailing stop has moved with the market and now sits at 6720 (30 points away).

    The next day the UK100 falls sharply to 6600, but your trailing stop is executed at 6720. The use of a trailing stop has meant you were able to protect some of the profit you had made whilst the market move in a favourable position. Your total realised profit is £2,200.

    On the flip side, in the same trade situation, if you opened your trade and the market fell gradually down to 6450, your trailing stop would be trigged at 6470, closing your trade with a loss of £300.

    Trailing Stop Loss Order Warning: Trailing Stop Loss Orders are not guaranteed - therefore in periods of market gapping your order may not be triggered at the specified price. Instead, your order will be triggered and your trade executed at the best available price our systems can get you – it’s important to note that this price may be worse than the level specified by you.

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