subject: For Difference Applying Stop Loss Orders [print this page] For Difference Applying Stop Loss Orders For Difference Applying Stop Loss Orders
The huge development of CFDs and financial spread betting over the years has been mainly due to the advantages these kinds of trading products have over conventional share trading in terms of no stamp duty, no taxes on profits. That is because CFD trading do not involve any physical delivery of shares and spread betting isn't considered trading but just betting.
These trading instruments are utilized by savvy investors to hedge positions to ensure that in the event of market movements that are sharp on the long or short side, they are able to protect their core portfolio value and don't have to resort to distress sales. Considering that they also obtain the benefit of leverage to have an extended time period at margin rates which are quite low, CFD trading assumes great importance for them. Conventional share trading does not allow you the luxury of settling trades beyond 2 to 3 days and since CFDs have without any settlement period, they're flexible and smart investors happen to be known to hold positions for a long time based on their risk enthusiasm.
However, CFD trading isn't without its risks and if you as a trader aren't careful about keeping appropriate stop losses, you are able to end up losing a lot of money. You need to be conscious of the various types of CFD orders in order to effectively trade CFDs.
Let's have a look at them below:
Market Order
To placing a purchase or sell order in the prevailing market rates.
Limit Order
This is for placing a sell request when the price is either exactly the same or is above a specified limit price.
Stop Loss Order
This is actually the most important kind of order as it enables you to get out of a losing position with some loss. The idea is to ensure that with increasing market volatility, you do not have to incur huge losses as can happen because of the leveraged position. Modern electronic trading systems allow such orders to be placed for CFD trading.
Guaranteed Stop-Loss Order
This order helps to ensure that you do definitely get the price you want your CFD to be sold at to ensure that in the event the market opens gap down, you'll still get your price. The order can even be placed at over phone and it is a premium service.
The discipline to place a stop loss order is very important if you have to ensure that you do not make big losses.
