Guaranteed Stop Loss Orders
Guaranteed Stop Loss Orders guarantee to close your trade at the exact trigger value you specify.
What are Guaranteed Stop Loss Orders (GSLOs)?
Guaranteed Stop Loss Orders work in the same way as standard Stop Loss orders. The key difference is that they guarantee to close your trade at the exact trigger value you set, regardless of underlying market volatility and gapping.
This is useful if you want added assurance that your position will be closed out at the exact price you specify.
Why is a Guaranteed Stop Loss Order beneficial?
Trade more, with lower margin required by placing a Guaranteed Stop
When placing a Guaranteed Stop Loss Order, you are limiting your maximum risk, so we ask you for a lower margin as compared to the standard margin. This frees up additional funds for you to trade with.
Trade with peace of mind
With a Guaranteed Stop you know your maximum risk, even in periods of extreme volatility and market gapping. If triggered, it ensures your trade will be closed at the exact level you have chosen.
Market gapping occurs when prices literally ‘gap’ between one price and the next, without trading at the prices in between.
This usually happens in times of extreme market volatility. Although this is not common, it is important that you are aware of the potential implications of sudden, sharp changes in market volatility.
A standard Stop Loss order doesn’t fully protect you from trading risk. This is because the closing trade is executed at the next available price immediately after the order is triggered.
This can be at the same price, or at a worse price, than the specified execution level. In cases of severe gapping, the execution price may be at a substantially worse price than your order price. This can result in a larger than expected loss on your trade.
Guaranteed Stop Loss Orders ensure that the level at which an order will be executed is the exact level that you’ve specified, regardless of market gapping.
Guaranteed Stop Loss Orders are most useful:
- If you want to lower margin required for the trade
- If you are trading in volatile markets
- If you don't want to risk more than your initial deposit
- If the market is prone to gapping (remember, markets can gap both ways)
Guaranteed Stop Loss Orders – what you need to know:
Guaranteed Stop Loss Order premium
You only pay a premium for your Guaranteed Stop Loss Order if it is triggered.
Guaranteed Stop Loss Margin
The margin required for your trade includes a 10% increase which is a regulatory requirement. However, the total margin required for your trade is still lower compared to the standard margin required without placing a guaranteed stop.
You can amend a Guaranteed Stop Loss Order without additional charges during market trading hours only.
Order levels must be placed a minimum distance above and below the current quoted price.
We offer our Guaranteed Stop Loss Orders on more than 4,000 markets. This provides a cost-effective method of managing your risk.
For details of Guaranteed Stop Loss Orders on a particular market, please refer to the 'Market Information' tab in-platform.
How to use a Guaranteed Stop Loss Order
In our example, imagine you had bought 2 Wall Street Index CFDs at 20420 and chosen 20300 as your maximum acceptable loss level. This is where you place your Guaranteed Stop Loss Order.
If triggered this would equate to a $240 loss allowance (20420 – 20300) x 2.
The Guaranteed Stop Loss Order premium for Wall Street is 4 x the quantity of CFDs, or the stake charged in the base currency of your account.
In this case the premium is calculated as 4 x 2 = USD 8 and is charged only if your Guaranteed Stop Loss Order is triggered.
The margin requirement for this trade would be $264 ($240+10%). The additional 10% is a regulatory requirement that is added on.
Two days after you have placed your order, the price of the Wall Street Index suddenly drops lower from 20420 to 20259.
With a Guaranteed Stop Loss Order in place, your trade has been closed out at the pre-determined level of 20300 for a total loss of $248 ($240 loss on your position + USD 8 premium on Guaranteed Stop Loss Order when triggered). This prevents further loss as a result of market gapping.
If you had placed a normal Stop Loss on your position, your losses would have been far greater. You would have been closed out at the next available price which was 20259.
(20420 – 20259) x2 = $322 total loss
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