Capital.com has reduced the fees it charges for using guaranteed stop losses (GSL), giving clients a cheaper way to protect their positions from large market gaps. GSL spreads have been narrowed across four separate asset classes, Forex, Equity Indices, Commodities and individual stocks and shares.
The fees or premiums charged for GSLs at Capital.com have been reduced as follows:
- Forex: the GSL charge is reduced from 0.10% to as low as 0.01% on major FX pairs
- Indices: GSL charges come down from 0.1% to as low as 0.02% on major equity indices.
- Commodities: GSL charges are reduced from 0.05% to 0.03%
- Shares: GSL charges on the top 10 most traded equities are cut from 1.0% to 0.5%.
Traders will now also be able to view GSL charges within their deal ticket before committing to a trade.
Stop distance minimums
Capital.com has also looked at the minimum distances that GSLs can be placed away from the current market.
Minimum distances have been decreased for most commodities, indices, minor FX pairs and the top ten traded stocks.
However, they have been extended for major FX pairs and less popular stocks.
The firm has also increased the maximum distance a GSL can be placed away from the current market price, this level has now been set to 75% of that value.
What are guaranteed stop losses, and why use one?
Guaranteed stop losses are a form of trade insurance which fix the maximum loss a trader can incur on a trade.
A standard stop loss order is executed at the next best available price, once triggered.
However, in fast-moving markets or markets that don’t trade 24 hours a day and which can therefore gap overnight, standard stop loss orders can be subject to slippage.
A guaranteed stop loss is not subject to slippage, because the price at which the trade will be closed has been specified in advance, clients pay a premium or fee for that facility.
Using GSL means a trader can quantify their risk at the outset of the trade which could allow them to take on a larger trade size than they might normally trade or to limit their risk to a fixed sum of money.
Guaranteed stop losses are a useful backstop for traders in volatile or fast-moving markets or for those occasions when you can’t monitor a position but still want to be in the market.
They can be helpful for newbies and novice traders who want to tread carefully and limit their risk in each trade they make.
The cheaper GSLs they are to deploy the better.
They are not a total panacea, however, because there will still be debates about whether they should or shouldn’t have been triggered.
With over 35 years of finance experience, Darren is a highly respected and knowledgeable industry expert. With an extensive career covering trading, sales, analytics and research, he has a vast knowledge covering every aspect of the financial markets.
During his career, Darren has acted for and advised major hedge funds and investment banks such as GLG, Thames River, Ruby Capital and CQS, Dresdner Kleinwort and HSBC.
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As well as extensive experience of writing financial commentary, he previously worked as a Market Research & Client Relationships Manager at Admiral Markets UK Ltd, before providing expert insights as a market analyst at Pepperstone.
Darren is an expert in areas like currency, CFDs, equities and derivatives and has authored over 260 guides on GoodMoneyGuide.com.
He has an aptitude for explaining trading concepts in a way that newcomers can understand, such as this guide to day trading Forex at Pepperstone.com
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