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Originally Posted by sminicooper Helpful input from Brumby. My added remarks (blue text) are in the context of a not particularly short-term trend trader using IG's facility.
The overwhelming advantage as far as I'm concerned is that I can define my total risk one of the few things over which I have control. I think of it as a hard stop that I don't expect to be executed I have a soft stop much closer but is there in the event of a Black Swan event. IG normally specify minimum stop distance of 10% but occasionally larger which might make the trade impractical no problem, just move on and trade something else; and think why IG want to limit their guarantee on that particular instrument!
For my type of trading it's low cost insurance that enables me to sleep easy. |
I am frankly not sure how this works for the Broker - it's a sure way to lose a lot of money quickly... Let's say tomorrow the market opens and I am 50% down and my guaranteed stop was only 5% down, they have to cover the 45% loss and charge me only 0.7% total if I exercise it...
This looks like amazing deal, especially the fact they'll charge me only if the event actually happens... too bad my brokers are not offering this...
__________________ "If you don't find a way to make money while you sleep, you will work until you die." Warren Buffett, CEO of Berkshire Hathaway. Count de Money number 1 trading rule: EDUCATE YOURSELF!
Before you trade even single penny on the stock market, please spend the time and educate yourself by back testing different trading strategies and ideas - go to eBay and search for "historical stock market data", you can buy 20 years of data for less than $100 - that's all you need to start.
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