forex cfd trading
The use of stop loss orders is an essential part of any traders’ risk management strategy, enabling them to minimise potential losses in volatile market conditions. They allow traders to preset a price level at which they want their position to automatically close, taking advantage of the flexibility of trading CFDs that offers the ability to trade on margin.
Having a stop loss is useful, especially when forex cfd trading with high leverage, because it helps traders to reduce the amount of capital they are exposed to. However, there is always a chance that a broker will not be able to execute a stop order at the price you specify, due to slippage in the price of the underlying instrument.
A guaranteed stop is an extra tool that brokers offer, allowing them to guarantee the execution of your stop loss order at the specified price. This is particularly important when you are trading shares, as they can be prone to slippage and gaps in the share market during periods of volatility. This can lead to your order being missed, and resulting in a larger loss than you would have experienced with a regular stop loss.
What are guaranteed stops in forex cfd trading?
A GSL is a stop-loss that caps your absolute worst-case loss when you are trading CFDs on margin. They are particularly useful when you are trading shares that tend to gap or are prone to slippage, and they help to protect your portfolio from large losses during unfavourable market conditions. A GSL costs your broker a premium, which they charge to cover the cost of accepting this risk on your behalf.
The premium charged for a GSLO is generally charged when you open the trade, and it can take the form of an extra commission or from widening the spread that you pay. You can see the premium displayed on your trade ticket before you place it, and if it is triggered, then this will be reflected in your P&L and overnight statement.
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It is always best to choose a broker with a strong reputation for transparency and fairness, especially when it comes to their dealing practices and pricing. Look for brokers that are regulated by the FCA or other regulatory bodies, as they will have to adhere to strict rules that protect traders. This will ensure that your funds are kept separate from the broker’s money, that they do not mislead you with false statements and that their pricing is clear and competitive. Ultimately, a good broker will make your trading experience far more enjoyable and profitable. They will have a friendly customer support team that can help you with any problems or queries that you may encounter, and will be able to answer any questions you might have. They will also be able to provide assistance with your trading strategies. They will be able to recommend suitable stop loss levels and help you get the most out of your trading.
