So what can traders do to protect against adverse movements in the market?
Several trading platforms, inducing IG, have various options traders can use to protect against adverse movements, particularly in fast markets
For example, setting up a stop-loss on the trading platform helps protect against adverse movements in your position. The trader sets his/her price tolerance to loss, then the position is automatically closed when the price is reached. Most trading platforms offer no trigger charge, but they also offer no guarantee against slippage, which means your position could close out at a worse level if the market gaps. Slippage usually occurs in periods of low liquidity, for example, morning or evenings when trading volumes are light.
“Several trading platforms, inducing IG, have various options traders can use to protect against adverse movements, particularly in fast markets”
Traders can protect themselves against adverse stock movements by attaching a guaranteed stop to their position
Brokers charge a small fee for guaranteed stops if the predetermined stop price is triggered.
A trailing stop loss can also be used to protect against adverse stock movements, thereby locking in profits
When a trader places a trailing stop loss it will move with his/her profits. If the market turns, your position will close out at your trailing stop’s new level. Trailing stops enable the trader to lock in profits without monitoring their position and changing the stop loss.
“A trailing stop loss can also be used to protect against adverse stock movements”
Limit orders are another way traders can lock in profits and protect against adverse stock movements, which can convert trading profits into losses
Most trading platforms will provide a feature for limit orders where the traders set the predetermined price and anticipated profits. The trade is automatically executed on the trading platform, profits locked in without the need for the trader to constantly monitor the position.
“traders can use stop losses, a trailing stop loss, guarantee stops and limit order to protect against adverse movements” – Win Investing
Some trading platforms also have other features such as price alerts, which can provide traders with an edge when it comes to monitoring price action
With price alerts, the trader is typically notified by his broker by either text or email when the market reaches a specified price. Some brokers offer to push alert notifications for free. Price alerts can be set up on the broker’s app or web-based platform. They are different from the text and email alerts. Since push alerts pop up on the trading platform or app and also on the traders’ mobile when using the broker’s app.
In summary, traders can use stop losses, a trailing stop loss, guarantee stops and limit order to protect against adverse stock movements
These features can be found in most trading platforms and they enable the trader to implement their trading plan with each order place without the need to constantly monitor their position.
For a comprehensive hands-on experience how a trading platform can protect against adverse movements trader’s can download a free IG demonstration account.
A broker demo account is a risk-free way of trying out trading, it is where traders go to so that they can familiarize themselves with the broker’s trading platform without risking their capital. The demo account typically provides traders with 10,000 GBP fantasy cash to practice their trading on the trading platform or app.
Win Investing would like to wish all of you successful trading.