Stop-loss orders
A stop-loss order is designed to limit potential losses by automatically closing a position if the market reaches a specified price. It is a risk management tool, not a guarantee of outcome.
Guaranteed stops
A guaranteed stop-loss order ensures your trade will close at the exact stop level you set, protecting you from slippage. However, a small premium is added to the spread when placing a guaranteed stop. Guaranteed stops are not free, but they offer certainty in volatile markets.
Margin and margin calls
Margin is the deposit required to open and maintain a leveraged position. If your account equity falls below required margin levels, you may need to deposit additional funds or close part or all of your position. Failing to manage margin can result in automatic position closure.
Slippage
Slippage occurs when your trade is executed at a different price than requested. It is more likely during:
- High volatility
- Low liquidity
- Major news events
Slippage is a natural part of fast-moving markets and can impact trading performance.
Stop orders vs limit orders
Understanding the difference between these two order types is essential for correct order placement.
A limit order is used to:
- Buy below the current market price
- Sell above the current market price
A stop order is used to:
- Buy above the current market price
- Sell below the current market price
Monitoring your account
You are responsible for monitoring your own trading account. You should:
- Use the trading platform to track open positions
- Monitor margin levels
- Manage your own risk
You should not rely on your broker or a third party to monitor your trades, or assume someone else is responsible for your risk management.
Automated trading strategies
If you create or use an automated trading strategy, you should test it on a demo account first and track results before applying it to a live account. Using an untested strategy in a live environment increases risk.
Explore more in our related guides:
- What are CFDs? – What CFDs are, how they differ from owning assets outright, and what drives the cost of trading.
- The mechanics of trading – How to read prices, calculate profit and loss, and apply leverage.