Hello,

First post from a newbie.

I'm interested in what other users of this forum think, and use, in terms of the different stops...? The definitions, I understand to be:

Guaranteed Stop:
Exactly what is says, no slippage, and the firm guarantees to meet my stop price - but I pay more in spreads. Margin required is stop distance x amount per point, and as such the max you can lose.

No-Stop:
Just what it says, I need to monitor my position closely, and close out positions myself. With better spreads, less margin required than guaranteed and Non-guaranteed stops, but with totally open ended risk.

Non-guaranteed Stop:
In a losing trade, dealing firm will try and close out the position as near to the stop as possible, but this will be subject to slippage in a fast moving market. Also, I am potentially exposed too a much larger loss (potentially huge given big enough bet sizes) if the price is move quickly against me. I get tighter spreads, but need to post more margin to hold the position than I would with a no-stop or guaranteed stop position.

So, the non-guaranteed stop looks ok first off, with tighter spreads and the benefit of a stop. But only as long as things aren't going really badly against me - in which case I can lose an awful lot more - regardless of the stop.

Personally, I'll be sticking with guaranteed stops until I find my feet, but as I said above, I am interested in your thought process to select your stops...

Also, and this might be a real stupid question, so apologies in advance – but why do I need to post more margin for a Non-guaranteed stop than I would with a no-stop…..

Thanks, Fog.

Hello

Here are my thoughts:

No stop: is how I made 15k in a month and gave back 20k in a week. It's stupid and is a guaranteed way to find yourself ina world of hurt.

Guaranteed stops: Sounds like a great idea, but imho it's pointless.
with them i will be paying a higher spread on every single trade, no fluctuations.

Non guaranteed stops: The money I save on the spread can go towards occasional slippage. In the last month I have only been stopped out twice at a worse level that planned, thanks to slippage and that is accross about 40 trades.
The slippage I got was extremely small.

I trade from 0.50 to 5 per point. I should imagine bigger positions would be more likely to justify the guaranteed stopps, especially on illiquid intruments but the way things are for me right now, i'd rather get tighter spreads and occasional slippage, than no slippage and paying extra, everytime i trade.

HTH

Sorry, cannot answer your last question, since I wasn't even aware of the issue.

Hi FogMonster,

I would never establish a position without a stop order unless my position size was so small that I really had very little to lose. E.g. a £1-per-point bet on a share price of 20p might mean that my loss was limited to £20 even without a stop order.

Aside from that situtation, I would always use a stop order.

I'm perfectly happy using non-guaranteed stops because I tend to spread my risk across many positions; so any one slippage / price gap should not adversely affect me too much in the grand scheme of things.

I would never pay a fee for a guaranteed stop, but in my Trading Trail blog I use the free guaranteed stops that are obligatory on the Shorts and Longs platform. The minimum stop distances of these guaranteed stops are difficult to deal with sometimes.

But sometimes these free guaranteed stops work in my favour and allow me to buy immediately at a lower price something that the spread betting firm will have to sell at the higher stop-out price. I call this a whipsaw profit; see here and here.

Despite this occasional slight-of-hand with guaranteed stops, I probably wouldn't go out of my way to use them.

I hope this helps,

Tony Loton, author of Stop Orders

Hi All,

Thanks very much. I think I am on the right track then, and your posts have given me some much needed insight into the appropriate use of guaranteed and non-guaranteed stops.

I think given the small size of my bets, I will be using non-guaranteed stops, regularly check the positions, and swallow any slippage incurred.

Re my last question, I can only assume that because the non-guaranteed stop carries potentially more risk, the firm will require that bit more margin to cover that extra risk, in the form of the slippage factor.

Thanks for you responses.

Cheers,
Fog.