How much do Guaranteed Stop Loss orders Cost?

Q. How much do Guaranteed Stop Loss orders cost?


A: Most CFD and spread betting providers offer guaranteed stop loss orders. If you intend to use guaranteed stop loss orders in your trading be wary that the charges can vary substantially across brokers and you really need to shop around to find the best value as guaranteed stop loss orders can easily double transaction costs.

For instance City Index charges 0.15% for trading UK shares and an additional fee of 0.25% for taking a guaranteed stop loss order. Of course this 0.25% guaranteed stop loss fee is just a start - the premium charge can go up by as much as 1% for trading particularly volatile shares. IG Index's guaranteed stop loss premium starts at 0.30%.

When working out your maximum amount to risk - the minimum stop loss distance also plays a key role. IG Index requires a minimum stop distance of about 5% to 12.5% depending on the share (in general the more volatile/the smaller the share the bigger stop loss distance required by your broker). In contrast City Index stipulates an all-inclusive policy of 10% for all UK shares.

For the FTSE, IG Index stipulates a minimum stop loss distance of 10 points on the FTSE 100 rolling while CityIndex will not allow stops nearer than 40 points. Brokers also have different charging structures for spread bets on indices - for instance IG Index adds 2 points to the spread on a FTSE 100 daily while City Index the charge on a FTSE rolling trade is 2 X the quantity that you are trading.

So for instance: If you place a £10 a point trade with a guaranteed stop loss at City Index the charge is 10 x 2 = £20. This charge would show on your account statement. IG Index, on the other hand will add 2 points on the FTSE 100 daily so in effect any gains you make would be £20 less or any losses £20 bigger.

Most providers will also allow guaranteed stops of forex trades. The charge for these at City Index is 5 x stake. So if you do a £3 trade the charge is £15.

Update: Ayondo now offers free guaranteed stops on most of their markets except individual shares. This means that you can take advantage of free guaranteed stops on every trade without slippage (subject to a minimum stop distance and maximum stake). So for example if you were to open a spread bet on the German Dax for £20 per point (it has to be lower than £25) and the stop loss is at least 34 points away then the stop will be guaranteed free of charge and automatically by Ayondo.

 ...Continues here - Situations where Guaranteed Stops are Useful

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