Order Types in Financial Spread Betting
When it comes to spread betting, we know that contracts are made between the trader and the broker that stipulate the basis of the spread betting transaction. If the trader is willing the market to rise beyond the spread, the difference is multiplied by the stake amount to yield a profit, paid out by the broker, and the reverse is true for losing positions. Conversely, traders can also sell positions short, and do a number of other things in the management of their trading account. But how do the trader and the broker communicate, and in what ways are traders capable of influencing how their positions work?
The answer is orders. Orders are effectively the instructions that traders issue, almost exclusively digitally, to their spread betting brokers in order to control their positions. Orders range from the very simple to the moderately complex, and are designed to offer traders the tools to handle their positions and their portfolio in a more flexible, customisable way. The most basic of orders are the orders to buy and sell positions, which open traders up to the market, and are the most simple to execute in practice. After a position has been researched and the trader is clear how he wants to trade in a particular market, buying or selling that market is the most fundamental element of spread betting, and it is advantageous that orders are defined clearly to allow swift execution and total control for traders over the destiny of their positions.
Orders are defined very rigidly in the functions they carry out, much in the same way as a software programme is designed to serve one particular purpose. This means that traders, having learned the various different types of orders and what they do, can communicate directly with the broker in a certain, defined way, to avoid unnecessary delay and ensure traders convey exactly what they want to happen to their trading positions.