Spread betting and CFD trading carry a high level of risk to your capital and can result in losses that exceed your initial deposit.
Capital Spreads is a trading name of London Capital Group Ltd (LCG). capitalspreads.com
ETX Capital Adds Trailing Stops
ETX Capital, a London-based spread betting provider, has upgraded its dealing software to support trailing stop orders. The new tool is now integrated in the software and traders can start using it to better protect profits.
ETX Capital has been offering several order types to its clients to allow them to control potential losses. That is the case of stop and guaranteed stop orders. At the same time, limit orders to lock in profits have been also available since long ago. The introduction of trailing stops adds flexibility and allows the trader to more effectively control losses without throwing away upside potential.
Why Use Trailing Stop Orders in Spread Betting?
When a market is moving in our direction we just want to ride the trend until it ends. A limit order is not effective because it will put us out of the market at some pre-defined price that can be much before the end of the trend. Sometimes, after moving in our favour, a market can suddenly turn unfavourable before our limit level is reached such that it touches our stop. In those cases we will be blaming how we end losing after being in the green side. The trailing stop allows us to get more from the upturn and better limit the downturn.
How to Set the Trailing Stop?
There are several ways of setting a trailing stop order, depending on the spread betting provider. To access this feature at ETX Capital you need to choose the dealing ticket for the asset you want to trade and click in the “advanced” button. You will then see a window where you can set the stop order and choose the trailing increments you wish, starting at 10 points for most markets.
A Simple Example
A trailing stop order will move your stop level every time the market moves some number of points. Let’s think on an example for FTSE 100. You see an opportunity to buy at 5,900 and decide to set a stop at 5,800 trailing the market in increments of 20 points. It means that if FTSE rises 20 points to 5,920, your stop will be moved also 20 points, to 5,820. If FTSE continues rising to 5,930 nothing happens because your stop is only moved with 20 point increments. At 5,940 the stop is again changed to 5,840. Most importantly, if the market then turns down, your stop does not trail that move. A trailing stop is never relaxed.
By accompanying the underlying market, there is no doubt that the trailing stop allows you to benefit more from favourable movements and keep gains when a trend is suddenly inverted. This is one of the best tools available in spread betting and something that you can now find at ETC Capital.