Stop, Limit, Trailing Stop and Price Tolerance
Trading CFDs may carry a high degree of risk, as even small movements can lead to massive profits or losses. A vigilant trader therefore, always provides their CFD positions with a stop and a limit. By not taking this step, you run the risk of remaining in a losing position for too long, in the hopes of a recovery, or not capitalizing on a profitable position in time.
Never leave an open CFD position unattended!
If you are not able to constantly observe your open positions, it is vital that you set a stop and a limit level. This will protect you from any surprises that may occur.
You have the following options:
Stop-Loss – limit losses
If you want to place or edit a trade or order, you can define a Stop-Loss. This protects you from higher losses, as it automatically closes your position at the next available market price when it reaches the Stop Level.
Please note the applicable minimum point difference when placing a Stop-Loss.
Take-Profit – secure profits.
Following the same principle as a Stop-Loss level, you can also automatically realize profits. A Take-Profit level can protect you from having a profitable trade change into a less profitable or a losing trade.
Please note the applicable minimum point difference when placing a Take-Profit.
You open a standard contract (Long) for the currency pair EUR/USD. As the chart shows, depending on the movement of the market, the position will automatically be closed if it reaches either the Stop or Limit Level.
Please be aware that the following examples and graphics are for illustration purposes only and should not be considered as trading advice.
This allows you to have an open position not requiring constant vigilance!
Trailing-Stop – following trends
With a Trailing-Stop you can benefit from ongoing trends. A reversal of the trend will, based on pre-defined criteria leading to an automatic closing of your position. You first determine a Stop Level, then with the help of a point specification (in terms of tenths of pips), you define how your Stop Level should modify itself.
You open a standard contract (Sell) for the currency pair EUR/USD at the price of $1.08486 with a Stop-Loss of $1.08986 short, and with a Trailing-Stop of 50 points. The price falls by 50 points, which causes your new stop to be set at $1.08486. As long as the trend continues at this tempo, your Stop-Loss Level will be continually updated. A sudden rise in the EUR/USD will cause your position to be automatically closed.
When placing a direct trade on the market, volatility may cause a change in the starting price between placement and execution of the trade. The booked trading price could be detrimental to your trading strategy. To prevent this situation, there is Price Tolerance. With Price Tolerance you define, in terms of points, the maximum deviation between the current bid/ask price you would be willing to accept.
The EUR/USD bid/ask price is currently trading at $1.08501/$1.08517. You want to give up a long position and are willing to accept a maximum price deviation of 5 points. Your trade will only be opened if the asking price is below $1.08522, otherwise the trade will be rejected by the system.