What are Guaranteed Stops and how do I use them?

Ben Weiss, Wednesday, 8 May 2019

What are Guaranteed Stops?

Guaranteed Stops refer to the risk management tool that ensures a position is closed at a predetermined price. It makes sure that losses cannot exceed a certain level and protects traders from market slippage and price gapping.

What is market slippage? 

Slippage is the act of a market moving in the time it takes for your trade to be processed. This means that the price that the market gets to bypasses the stop put in place. This may have happened as a very sharp price change could have occurred in a split second.

What is price gapping?

Gapping is where a market opens at a considerably different price to what it closed at. With no trading action in between, gapping can mean that a stop is again bypassed as the market price never actually hits the predetermined price set. For instance, if a market closes at 100 and opens the following day at 90, a basic stop at 95 would not be triggered and thus the trading position would still be opened.

How are guaranteed stops better than basic stops?

Guaranteed Stops ensure that the broker effectively adopts the risks that come with slippage and gapping. This means that traders are protected by any market movement that may go against them, as the position will 100% be closed at the selected price. This is not the case with basic stops.

Guaranteed Stops vs Basic Stops

Guaranteed Stops

Basic Stops

  • Offer complete market protection against slippage and gapping
  • Offers little market protection and are not always triggered
  • In nearly all cases, brokers charge a fee (ETX Capital’s Guaranteed Stops are free*)
  • Are always free


Which brokers offer Guaranteed Stops?

Almost all brokers in the industry offer Guaranteed Stops at a fee.

What are free Guaranteed Stops?

Free Guaranteed Stops are exactly the same as Guaranteed Stops, but are not offered for a fee and instead are free to use. This is a good advantage for traders, as there is absolutely no cost whatsoever to implement the free Guaranteed Stops, and they're an extremely effective risk-management tool. By not charging fees, brokers are taking on all of the risk that comes from market gapping or slippage at a certain level of self-cost. 

Free Guaranteed Stops at ETX Capital 

Free Guaranteed Stops are offered to all our retail clients on specific markets at ETX Capital. We value your custom, and know how volatile markets can be. So it’s only right that we provide you with the most comprehensive level of protection against any fluctuations that may occur. Why pay for the privilege anywhere else when you can use Guaranteed Stops absolutely free on our award-winning TraderPro platform?

Guaranteed Stop example

Guaranteed Stops can be used on a range of markets. Let's use HSBC as an example, and say its current price level is at 100. If a buy position is opened at £1 a point and a Guaranteed Stop is placed at price level 80, that means the maximum possible loss would be £20.

This is because 100 (price level invested at) - 80 (price level of stop) = 20 x £1 (amount per point) = £20.  

A regular stop placed at 80 would often close the trade at that price. However, if the price of HSBC closes the day at 82, and opens the following day at 79, it bypasses the 80 level and never actually trades at that price. Therefore, what often happens is that despite the price falling below the pre-set level of the stop, the position remains open.

In contrast, what would actually happen is that the Guaranteed Stop that was put in place to stop the HSBC trade at 80 will close the position at that level, regardless of market gapping. 

How do I apply a Guaranteed Stop on a trade with ETX Capital?

Adding a Guaranteed Stop to a trade has never been easier. With ETX’s own TraderPro platform, this is done by ticking the ‘Stop’ option on a trade ticket and then selecting ‘Guaranteed’ from the drop-down menu.

Free Guaranteed Stops screenshot

See the times that free Guaranteed Stops are available on our most popular markets. 

Download Guaranteed Stops PDF

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