A Stop Loss is an instruction to close your trade, should the market move against you.
For example, you open long position on a share CFD priced at $20 and place a Stop Loss at $19. If the share price rises, you can close your position for a profit. However, if the share price fell to $16, your Stop Loss would be triggered and your trade closed at $19, protecting you from further losses.
Stop Losses are Non-Guaranteed, which means that, if the market doesn’t trade through your Stop, you may be forced to exit the position at a less favourable level. This is called slippage, and can occur overnight or in fast-moving markets, when there may be gaps in prices.
For example, the previous position may have finished one day’s trading at $19.10, and opened the next day at $18.80. If this had happened your trade would have been closed at $18.80, rather than at your $19 stop.
Non-Guaranteed stops offer a simple way to increase your protection against adverse market movements, and are available by phone and online, giving you the freedom to manage your risk even while you are away from your desk.