We urge traders to be wary of guaranteed stop losses, and to use guaranteed stops sparingly in their day-to-day trading.
Guaranteed stop losses, which automatically settle open positions upon reaching a certain pre-defined price limit, are designed to help prevent runaway losses and protect trading capital, and have proven to be a popular innovation across the spread betting platforms on which they are currently available.
However, with guaranteed stops costing extra on top of the cost of placing a transaction it is contended that their inclusion should be limited to use on a more selective basis as a protective measure against riskier positions, rather than as a staple of a particular individual trading style.
independentinvestor.com suggested that while guaranteed stop losses can be an important aspect of securing your trading portfolio against riskier positions, their additional cost should not be effected with every single trade, to avoid handicapping your spread betting success.
“Guaranteed stop losses are an invaluable tool in spread betting, and traders from all ends of the spectrum rely on the security these stop losses provide in limiting the extent of their exposure to risk. At independentinvestor.com, we welcome the widespread roll-out of guaranteed stop losses across different trading platforms, although we urge traders to take a suitably cautious approach as to when and when not to implement these additional trading orders.”
“Just because guaranteed stop losses are on offer doesn’t mean you have to effect them as part of every single position you take. The additional cost involved in positioning your stop, complete with the restrictions it can pose when positioned too tightly make it the ideal tool for occasional use. While it can no doubt be the saviour of your account, it is crucial that traders are selective in their deployment of the guaranteed stop loss to prevent accruing substantial and unnecessary additional trading costs over time.”
The advice comes off the back of the launch of Capital Spreads’ Guaranteed Stop Loss service, which was unveiled to clients amidst a marketing fanfare and has already proven a valuable and widely used added service to Capital Spreads customers.