Controlled Risk Bets

DerekL

Newbie
8 0
Can anyone help?
New to trading and concerned about short positions. Just opened a D4F SB account and I want to limit risk on short positions. Should I always place CRB orders or could I adequately limit losses just by placing a Stop Buy order at an appropriate level? Is there a problem with rouge orders that could wipe me out so that I have to sell my house? Or does D4F filter those out. Have been back testing a system using Metastock and some bad data,that has caused me to think!
Thanks.
 

options

Senior member
2,374 218
Hi DerekL.
You should also be concerned about 'long' orders as well. Same rules apply.
CRB will give you a guaranteed stop at the price you specify. You pay a bit more in the spread to cover for the privilege. An extra 4 points I think. On top of the quoted spread.

A stop order will get filled, but if the market is suddenly going like an express train, it may well be past where you placed the order, so you could be a further 30/40 etc away.

If other orders are ahead of you in the queue, you just have to wait your turn until you are next up.

Personally, I have never encountered any problems with a stop being filled away from where I placed it. Others on here can tell you a few horror stories though.

It has in the past, worked in my favour on occasion where the market has traded past the stop, reversed and carried on in the desired direction, leaving the stop intact. Luck of the draw I guess.

Rogue orders? Depends which side of the trade you are on when these things happen. If the wrong side of it, your stops get hit and you end up flat. The market will generally correct itself in due course and end up in the same place before the spike. So if you are eod trading you will lose out both ways as you lose out on the profit sitting on the table.

The sb's will not filter out these trades. Why should they? If they did they would be guilty of more manipulation then they already are. It will work both for and against them.
What will happen though is if a run starts suddenly and you grab the coat tails, you could well find that the trade is void. This happened a few months back. The big boys got caught out by a massive spike in the market so they voided all trades from a certain time. Had you got the order in 30 secs earlier you were laughing. Changing the rules to suit, moving the goalposts? Oh yeah. Would it have happened if the big players had been the correct side of it? All down to being in the right place etc. This was on ACE by the way. The sb's just voided the spike, don't know from where though. In any case if you try to put a trade on, or even worse try to exit a trade when these runs are going, you could well have a great deal of trouble getting through and getting filled.

"Is there a problem with rouge orders that could wipe me out so that I have to sell my house? "

Well, first off. Don't have a credit account. Being new to trading don't trade with any size. In fact use the least amount possible. £1 at a time. You don't know yet if you are suited to trading. When a trade goes against you the first couple of times, you will start to find out a lot about yourself that you never realized was inside. In fact don't trade until you fully understand the rules (and then be adaptable). It is not an easy way to make money.
 

DerekL

Newbie
8 0
CRB's

Hi Options,
Thanks for the detailed reply.
I do intend keeping my bets to the minimum as I am a new player. When you say 'don't have a credit account' I assume you are advising not to open short trades - at least until I have gained more experience. On long trades you do know what your maximum loss could be, but on a short trade it could in theory be unlimited. So if I were to trade short your advise would be always to trade short with CRB's?
Thanks once again.
 
A

aussietrader

0 0
Derek,

Long or short the risk is very similar. Don't open a credit account means only use the money you have on depost with the bookie to trade with. Don't allow the bookie to extend credit to you to bet with.

Good luck with your trading.

AT
 

options

Senior member
2,374 218
Rogue.

Slip of the keys I think.
Just like when a order is put in for 50000 instead of 5000.
 

jklondon

Active member
212 2
Used CRB with IG for a few months when I started , now not using it since you get * over on the spreads !

Slippage has been zero as well ...so all good.
 

options

Senior member
2,374 218
Lol, JK, you get screwed over with any sb co, but a lot depends on your time frame. It is generally accepted that it is very hard to day trade using sb's. Better to use direct access. Longer term trades of a few days or more, then the spread is not so much an issue. though you will always give more away to the sb co. But then again you pay no tax.
 

adrianallen99

Established member
630 4
ofc you only pay tax if you make money anyway, so If I had a million pound CGT bill, I would not mind too much :)

Ive been trading for a while, but just starting SBs as well, before I have even made my first trade the SB company is suggesting I open a credit account. Also with controlled risk, you can be asked to place very large deposits. One company I was only allowed to place a guaranteed stop at 0.01p. I would be better of buy the shares.
 

Kilnside

Member
92 0
Going back to DerekL's first post my take on CRB's (commonsense really) is that the loss limit is GUARANTEED or it is worthless - no qualifications, no Force Majeure, no "normal circumstances".

Without that you are exposed. It's a bit like fire insurance. As you study the small print of your bargain policy in the light of the flickering flames, you really don't want to discover that the company will pay out "if it can afford it". Why buy that at all? Go Direct if you have the funding.

People tend to weigh only those risks they know about. If you haven't seen a "clear air" situation before, with web sites crashing and phones off the hook you will sleep easy. If you have deep enough pockets and can bleed longer than the average punter you will probably be OK - sometime. Go direct if you have the funds but otherwise us newbies should look for guaranteed stops.

Regards
 
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adrianallen99

Established member
630 4
Stops are important, guaranteed stops are a good way of limit loses. A friend of mine lost £10k in a day because he didnt set up any stop losses and the share lost 50% - at least he had that kind of cash. With SB and CFD's without a guaranteed stop he could have used a £1000 deposit (5%) to lose that kind of money.

If your new to this, like me probably the safest bet. The only reason I would ever open a credit account was if I had the money spare in another account.
 
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