Guaranteed Stops

[TheBramble]

I'm starting this thread in "Stocks & Shares" but it equally applies to all traded instruments and brokers offering 'guaranteed stops'.

1. If you keep a stop with your broker, what would prevent them from quoting the market outside your stop for a second (or less!), triggering your stop and then going back to a normal market quote?

2. For those brokers where the 'guaranteed stop' is known to be genuine (with no known jiggery-pokery to trigger them): -

a) Open accounts at two separate brokers with this facility/service.

b) Before major announcement go long in one account and short in another, with a very close stop.

c) Retire very young....

Where is the flaw in my logic/reality? It doesn't make cents....

 

[roguetrader]

Hmmn problem I forsee with that, "jiggery-pokery" aside is that with major news events pending you often get a lot of speculative positioning in the runup, Market often very choppy just prior to the announcement and you'd quite possibly get stopped out of both sides.

 

[darrenf]

It worked for a while in fx when the well known brokers offered guaranteed stops. Many people took advantage of this around big news time in a similar way to you describe.

However, the brokers soon got wise to this and amended their stop terms to something along the lines of "stops are guaranteed except when we don't want to" which can of course be at any time. Makes a mockery of the word "guaranteed" imo but the brokers still use it to lure people in.

Don't get me wrong, I'm not bitter about it, having taken advantage of the facility myself a few times before the party was brought to an end! At the end of the day, I would doubt any sensible broker can offer true guaranteed stops- it could put them out of business and doesn't therefore make good business sense to offer them.

 

[LION63]

I do not want us to debate Spread betting so please try and avoid it whatever your personal views on the subject might be.

IG Index are an example of a company that offer guaranteed stops on all trades; for this they charge a higher spread. Their guaranteed stops are absolutely that regardless of market conditions which is sometimes worth the extra premium paid. The added advantage with IG Index is that one can open straddles (2 trades in opposite directions) and where one is expecting high levels of volatility, take advantage with tight stops as mentioned by The Bramble in his earlier post.

With reference to a couple of other threads in respect of Disaster Planning and the Absolute Risk to one's capital base; the guaranteed stops offered by IG help one control the absolute downside at any given time. If there are those that disagree, I look forward to hearing their views but I am sure that in the context of controlling risks, this is definitely an advantage.

An added bonus is that it means one can trade larger positions, I note that The Bramble and Trader333 are very risk averse and with good reason; their strategies ensure that they are able to sleep at night knowing that in the worst case scenario, they cannot go under and have to sell the family home. On the other hand, having guaranteed stops allows traders to adopt a halfway approach ie. taking on more risk without betting the ranch.

 

[DaveJB]

No argument from me, it's a tool that some offer, and for those able to make use of it to limit risk it's certainly worth at least considering... as anything offering apparent advantges in risk limitation should be.

 

[roberk]

I'm

2. For those brokers where the 'guaranteed stop' is known to be genuine (with no known jiggery-pokery to trigger them): -

a) Open accounts at two separate brokers with this facility/service.

b) Before major announcement go long in one account and short in another, with a very close stop.

c) Retire very young....

Where is the flaw in my logic/reality? It doesn't make cents....

You can do this at all brokers with futures.
I used do that with my account - as a way of offsetting. So open both a long and short postion in dax and try to juggle it so that I closed out one position and let the other trend. However more often than not I wouldn't time it quite right and end up losing a little. It only works when the market really breaks out.

 

[DESKPRO]

I'm starting this thread in "Stocks & Shares" but it equally applies to all traded instruments and brokers offering 'guaranteed stops'.

1. If you keep a stop with your broker, what would prevent them from quoting the market outside your stop for a second (or less!), triggering your stop and then going back to a normal market quote?

2. For those brokers where the 'guaranteed stop' is known to be genuine (with no known jiggery-pokery to trigger them): -

a) Open accounts at two separate brokers with this facility/service.

b) Before major announcement go long in one account and short in another, with a very close stop.

c) Retire very young....

Where is the flaw in my logic/reality? It doesn't make cents....

Interesting .. been investigating works fine on a lot of occasions except today just a few minutes before the US Durable news was not able to out an entry order - using FXCM... got message that kept saying entry is too far away from current price .. EUR /$ was 1.3040 and only allowing entry order around the 1.3500 mark....has anyone noticed this as well? does this happen with other fx or sb companies?

 

[DESKPRO]

It worked for a while in fx when the well known brokers offered guaranteed stops. Many people took advantage of this around big news time in a similar way to you describe.

However, the brokers soon got wise to this and amended their stop terms to something along the lines of "stops are guaranteed except when we don't want to" which can of course be at any time. Makes a mockery of the word "guaranteed" imo but the brokers still use it to lure people in.

Don't get me wrong, I'm not bitter about it, having taken advantage of the facility myself a few times before the party was brought to an end! At the end of the day, I would doubt any sensible broker can offer true guaranteed stops- it could put them out of business and doesn't therefore make good business sense to offer them.

Never heard of them but on

http://www.danielstrading.com/content/serv_refx_adva.php

"Finally, unlike most other forex firms, dt FX guarantees a fill at the specified price on all stop and other limit orders up to $1 million in size. By using the guaranteed stops offered by dt FX, you can limit your risk on a trade to the amount you choose."

 

[DESKPRO]

Never heard of them but on

http://www.danielstrading.com/content/serv_refx_adva.php

"Finally, unlike most other forex firms, dt FX guarantees a fill at the specified price on all stop and other limit orders up to $1 million in size. By using the guaranteed stops offered by dt FX, you can limit your risk on a trade to the amount you choose."

By the way

http://www.ac-markets.com/EN/services.execution_methodology.asp

Has 3 pips spread on the 4 major currency pairs.. first time I have seen this on all 4...