Guaranteed Stop Loss Orders FAQs
- What is a guaranteed stop loss order (GSLO)?
- How does a GSLO work?
- How does this benefit my trading?
- How does using a (GSLO) fit into my trading plan?
- How much does a GSLO cost?
- How do I place a GSLO?
- Can I change my GSLO after making a trade?
- Can I add a GSLO to an existing position?
- Can I cancel a GSLO?
What is a guaranteed stop loss order (GSLO)?
A (GSLO) is an order that closes your trade at an exact level chosen by you, regardless of market gapping. A regular stop loss order may not protect you from slippage, particularly in times of heightened volatility, where markets can 'gap' between one price and the next without trading at the prices in between.
At City Index, you can add a GSLO over a wide range of financial markets. You will only pay a premium if your GSLO is triggered.
How does a GSLO work?
Imagine you bought two Australia 200 CFDs at 7000. You choose 6900 as your maximum acceptable loss level, which is where you decide to place your GSLO. If triggered this would equate to a $200 loss allowance ((7000 – 6900) x 2).
The GSLO premium for the Australia 200 is 4x the quantity of CFDs or stake charged in the base currency of your trading account. In this case the premium is calculated as 4 x 2 = $8 and would be charged only if your GSLO was triggered.
Over a weekend, two days after you place your order, the price of the Australia 200 gaps lower from 7000 to 6800. With a GSLO in place, your trade has been closed out at the pre-determined level of 6900 for a total loss of $208 ($200 loss on your position + $8 premium on GSLO when triggered).
If you had placed a normal stop loss order on your position, your losses would have been far greater as you would only have been closed out at the next available price which was 6800.
(7000 – 6800) x2 = $400 total loss
How does this benefit my trading?
Our new GSLOs are a cost-effective way of managing your trading risk, giving you added peace of mind during times of volatility. You can attach a GSLO to a position in the knowledge that you will only pay a premium should the stop be triggered, saving you money.
Our expanded GSLO offering now also covers more markets than ever before including major equities, indices, forex (FX) and commodities. If you already have an open position, you can add a new GSLO via the deal ticket on the trading platform and will still only pay a premium if your stop is triggered.
GSLOs 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)
How does using a (GSLO) fit into my trading plan?
Risk management is a crucial part of any trading strategy, especially if you are new to trading. Trading the financial markets is like running a business and ensuring you have the right protection against losses is fundamental to ensuring you don’t lose too much too quickly.
GSLOs are particularly beneficial in volatile markets or at times of extreme volatility where there is a risk of the markets gapping. They can also help ensure that you don’t risk more than your initial deposit by capping any potential loss at a risk level set by you.
How much does a GSLO cost?
The cost of your GSLO – called your guaranteed order premium – is based on the size of the position you wish to cover. You will only pay a premium if your GSLO is triggered and this will appear on your next statement as a separate charge. The charge or premium you pay is calculated differently for different markets either as:
Number of points x quantity of your position (For example on indices such as the Australia 200 or Germany 40)
Percentage x notional trade value (For example on equities such as Commonwealth Bank of Australia (CBA)
As a guide, charges for the following popular markets are currently:
- Australia 200 CFD: 1 x quantity of CFDs charged in base currency
- CBA share CFD = 0.5% of notional trade value
How do I place a GSLO?
To place a GSLO on any financial market, open the deal ticket on the trading platform and select the direction of the trade you would like to place, either Buy or Sell. Next, enter the quantity of your order; you can do this by entering a figure manually or by selecting a pre-determined quantity using the drop-down menu option.
To place your GSLO, open the Stop & Limits tab and select the ‘stop’ checkbox, then fill in the price and quantity to determine the level at which your position will close out. Remember to tick the ‘guaranteed’ checkbox.
Further options in the deal ticket allow you to add a trailing stop and a limit order on your trade. Once you have filled in all the information for your stop, click the place trade button and your position will be opened with a GSLO attached.
Can I change my GSLO after making a trade?
Yes, you can change the level of a GSLO after placing a trade by opening your position and amending the price or quantity at which your guaranteed stop will be triggered. You will not be charged for amending a GSLO on an open trade. There are limits on how close a GSLO can be placed to the current market mid for each instrument.
Can I add a GSLO to an existing position?
If you have a current position that you would like to add a GSLO to, follow these steps:
- Visit the open position tab on the trading platform
- Open your trade and select the Stop & Limits section within the deal ticket
- Select the price and quantity at which you would like your Guaranteed Stop to be triggered
- Select the ‘stop’ checkbox to switch to a GSLO
There is no additional charge for adding a GSLO to an open trade. Note: The market will need to be open for you to add a GSLO.
Can I cancel a GSLO?
Yes, you can cancel any guaranteed stop loss order on your account at any time, free of charge.