The Stop Loss Tool

A stop loss is a simple tool that can be set in place as a trigger to make a stopping action once a predetermined target or level has be reached. It is fairly common for an investor to set a stop loss amount that will effectively render their investment to stop if the buying price falls to a chosen lower level. This is aimed at reducing the chance of a bigger loss being incurred. The buying price once reached will be bought by the investor so any raise in the figure will be a welcomed profit but if the market price was to fall a liability will result. If the liability must be controlled to within a safe level the investor simply flags an amount below the buying price in order to stop further investment and potential risk.

How to use stop loss tool in spread betting

A stop loss amount will normally be set at a little lower than the buying price. This is seen as the most prudent way for an investor to cut their losses and endure a small loss rather than risk further capital if the market price falls even further. This is normally set completely at the investors wish and skill and good judgment is required to set an effective level. It is known that a stop loss level may be hit and the automatic trigger sent to the CFD provider so sell for a small loss only to subsequently see a recovery in the price back to a profitable position that cannot be fulfilled after the stoppage.

Set trading limits with stop loss

A stop loss can be applied within spread betting applications based on a temporary quick stop loss on an open position or more experienced bettors may put in a stop loss on an unmatched bet. Temporary stop losses may be placed so when this level is reached when using actively traded markets a closure bet is made. This closure bet will be constantly adjusted on betting platforms and is determined by the underlying difference fluctuating between backing and laying bets. The stake is rapidly adjusted to follow suit.

Stop loss on an unmatched bet however looks to offset the potentially losing bet with a stop. The unmatched bet will be closed and the stake is not adjusted in the same way.

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