Guaranteed and non-guaranteed stop losses

[JTrader]

Hi

I would be interested to hear feedback, particularly from people who trade FTSE stocks with CFD's or spreadbet's, particularly with D4F.

I have not done so yet, but I'm wondering if traders feel that it is worth paying a premium of 2 points + to have the stop losses guaranteed. Or, do you feel secure enough with non-guaranteed stop losses in place?

If a share price moves signficantly and beyond a non-guaranteed stop level they aim to close the trade at the first available price. Have people any experiences of this and how quickly and close to the stop level were your positions closed?

Thanks in advance for any feedback

jtrader

 

[FTSE Beater]

Hi Jamest

IMO They are a complete waste of money. It's been a long long time since I saw a FTSE 100 company gap significantly enough to be a problem. If you saved the money on every trade that you didn't use a protected stop and you did have a large loss the - money you saved would more than cover the money lost.

I think they are just playing on peoples fears and I see no reason why you would need a guaranteed stop.

If a share price moves significantly and beyond a non-guaranteed stop level they aim to close the trade at the first available price. Have people any experiences of this and how quickly and close to the stop level were your positions closed?

If the price gaps beyond your stop, then they will close it for practically whatever price it gapped to, regardless of the distance from the stop. They close the trade instantly, which in most cases is the wrong thing to do, as price will tend to close the gap.

Just my thoughts

 

[mmillar]

Hi jamest,

All sorts of things to take into account including your risk profile and how long you are going to hold the trade. IMHO you would have to be a very cautious person holding over a long period of time to warrant using Controlled Risk Bets (CRBs) on a regular basis. Of course there are always exceptions, especially if you are expecting some news that you think may cause the market to gap.

My stops on individual shares have been missed before (and you get stopped out at the nearest price that it did trade) but always due to the opening bid/offer spreads. If you do use stops overnight you need to be careful that they are not too close to the market or they can get hit easily.

A D4F trader once refused to give me a CRB on the FTSE because he said it was a waste of my money!

Cheers

 

[ivorm]

Hi jamest,

I've never had a problem with non-guaranteed stops with d4f.

CRB's are very expensive and as FTSE Beater said, the money you save not using them would probably exceed any loss that you may incur.

It's worth saying, however, that CRB's may be appropriate in some cases, (i.e. when you anticipate news that might cause a big shift in price). It also depends on which markets you trade - generally you should be ok using non-guaranteed stops with the major indices, FTSE stocks and similar liquid instruments.

HTH

 

[warm_machine]

Generally don't use stops, but I would've thought CRB's would be most useful if you are trading forex or large stock position prior to a big data release - you don't want to exit prior to release in case the data pushes your trade further into profit, while at the same time you need to be sure you're out at a predefined level should the data spike the market against you.