Financialspreads.com UK regulated spread betting broker has made some improvements to it’s guaranteed stops.
What is a guaranteed stop? Well basically it gives customers protection against massive shock moves in financial markets. There are a few different types of stop…
Market stop – this is the most common and means that if your stop level is triggered you will place a market order. If there is low liquidity this could be a fair distance from your actual trigger price meaning you get a bad price because of “slippage”
Limit stop – this means when you stop is triggered a limit order is placed in the market. The advantage of this is that you don’t get slippage. The disadvantage is that if the market does not come back up to your level then you are not filled and your stop does not get triggered.
Stop if touched – this means your stop is triggered if the stop price is touched (bid/offer)
Stop if traded – this means your stop is triggered if your stop price is traded.
GTC stop – this is a stop good till cancelled – some brokers assign these to positions, but if they don’t and you manually close a position your GTC stop will still be active in the markets (one of the most common broker/trader errors)
GTD stop – a stop that expires at the end of the day
Guaranteed stop – these mean that if a price goes way through your level you will still be filled. They are more expensive than normal stops as the bid/offer spread is wider. Also, they are only valid for small orders in liquid markets.
Anyway, FinancialSpreads.com sent this out to customers and partners.
Summary of Key Risk Management / Guaranteed Stops Improvements
1) Fairer Charges
FinancialSpreads now only charge clients for Guaranteed Stop orders if the order is triggered.
As discussed below, it’s a bit like only paying for your car insurance if you have an accident.
Clients are not charged for using Guaranteed Stops if:
– Clients manually close their trades, or
– Trades are closed because they hit a Take Profit (Limit) order, or
– Clients remove the order.
As you probably know, most providers charge clients when clients add a Guaranteed Stop order to their trade, irrespective of whether the order is used or not.
2) We Have Lowered the Cost of Our Guaranteed Stops
We now only charge clients 3 points on stock indices, forex or crude oil markets (except for ZAR and HUF forex markets where we still charge 10 points).
3) Flexible Orders
Guaranteed Stops are still flexible. Clients can add, remove and adjust Guaranteed Stops on open positions.
Again, if the order is not triggered, clients are not charged.
Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.