If you are looking for a broker that offers guaranteed stop losses, we’ve put together a handy little guide on what guaranteed stop losses are, their advantages and disadvantages and also which brokers offer them.
First off, what is a guaranteed stop?
Guaranteed stop losses are a very effective way to manage risk when trading CFDs or spread betting. They are like normal stop losses but differ in that the price you set is guaranteed.
The main differences between stop loss types
There are a few different types of stop losses in financial trading
- Market stop loss – this is triggered as a market order when your stop price is triggered. The advantage of this is that you will always be filled. The disadvantage is that if the market is thin or volatile slippage means it could be far from your stop price.
- Limit stop loss – this is triggered as a limit order when your stop price is hit. The advantage is that your position will only be filled at your stop price or better. The disadvantage is that if the market gaps below your stop price it won’t get filled (if it’s a sell stop).
- Stop loss to open – this is when you set an order to open a position when your stop price is hit rather than close one. The advantage is that you can open a position if the market starts moving the way you want it to.
The difference between guaranteed stop losses and normal stop losses
The clue here is in the name. You are guaranteed to get the price you set. No slippage, no partial fills.
Is there a guaranteed stop cost or premium?
Yes most of the time – this will be in the form of a widened spread. Most brokers charge slightly different amounts but it will be shown on the trade ticket when you enter the order. For example, IG guaranteed stop losses come with a 0.8 point premium for the FTSE 100 (see image).
CFD and spread betting brokers that offer guaranteed stops
Here’s a quick rundown of three decent brokers that offer guaranteed stop losses on their trading platforms:
- IG – 195,000 active clients, founded in 1974 – the current market leader – 15,00 markets
- City Index – 20,000 active clients, 12,000 markets – owned by Gain Capital
- Spreadex – a smaller spread betting broker based in St Albans – excellent customer service
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Richard started the 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.