Guaranteed Stop Loss Orders (GSLOs)
GSLOs guarantee to close your trade at the exact trigger value you specify.
What are guaranteed stop loss orders (GSLOs)?
Guaranteed stop loss orders work in the same way as standard stop loss orders, except they guarantee to close your trade at the exact trigger value you set, regardless of underlying market volatility and gapping. This is useful if you want added assurance that your position will be closed out at the precise price you specify.
Why is a GSLO beneficial?
Market gapping occurs when prices literally ‘gap’ between one price and the next, without trading at the prices in between. This usually happens in times of extreme market volatility and while not common it is important that you are aware of the potential implications of sudden, sharp changes in market volatility.
A standard stop loss order doesn’t fully protect you from trading risk as the closing trade is executed at the next available price immediately after the order is triggered. This can be at the same price, a better or a worse price than the specified execution level. In cases of severe gapping, the execution price may be at a substantially worse price than your order price, resulting in a larger than expected loss on your trade.
For added peace of mind, guaranteed stop loss orders can be used. GSLOs are used to ensure that the level at which an order will be executed is the exact level that you’ve specified, regardless of any gapping in the market.
Guaranteed stop losses are most useful:
- If you're trading in volatile markets
- If you don't want to risk more than your initial deposit
- If the market is prone to gapping (remember, markets can gap both ways)
Guaranteed stop loss orders – what you need to know:
There is an additional charge for placing a GSLO upon confirmation of the order.
A GSLO can be amended without additional charges and during market trading hours only.
Order levels must be placed a minimum distance above and below the current quoted price.
GSLOs are not available on all our markets.
For specific GSLOs on a particular market, please refer to the 'Market Information' tab within the trading platform.
How to use a guaranteed stop loss order
Let's say you've bought 2 Wall Street Index CFDs at 20420, and have highlighted 20370 as your maximum loss level. A $100 loss allowance (20520 – 20370) x 2.
You pay a premium of 4 x your stake for the guaranteed stop loss, 4 x 2= $8
Guaranteed stop loss example
Some bad earnings data pushes the Wall Street Index lower and then it drops suddenly from 20420 to 20359.
Fortunately, you had a GSLO and your position is closed out at 20370 with a $100 loss.
Had you opted for a standard stop loss order of 20370, your order would have been filled at the first traded price, which was 20359. This would have resulted in a total loss of $122.
In this example you would have been better off with a guaranteed stop loss as your total loss was $108 ($100 + 8 premium) as opposed to $122 with a normal stop loss.
GSLOs can help protect you against rapid price movements in both rising and falling markets.
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