The use of stop orders is a practical way of limiting the amount of money that you risk when opening a spread bet. A stop order is simply an instruction that our clients leave with us to close a trade in the event that the market turns against them, at a predetermined level of loss that they decide is acceptable to them, or is in keeping with the funds available in their account.
An example of a share trade illustrates this:

Figure 1 Stop order

A position is opened by a purchase of £10 per penny at 500p. By placing a Stop order to sell the position if the price should fall to 450p (a) the maximum potential loss is £500 (£10 x 50 points = £500).

As can be seen from Figure 1, the stop order proved its worth, as the market went on to fall well below the 450p level.

Although we always try our best to ensure that a Stop order is executed at the price requested, in particularly volatile markets this is not always possible. To avoid this potential 'slippage' it is possible to use a Guaranteed Stop. By paying a small premium when you open your spread bet and placing a Guaranteed Stop order, you can be sure that should your Stop be triggered it will be executed at the price you requested, no matter how volatile the markets are. More information on Guaranteed Stops can be found in our Customer Agreement booklet.