All about stop losses

A stop loss is a term often used in spread betting so when you start researching or spread trading you’ll hear it a lot. A stop loss is pretty much as described, it stops you from making too much of a loss. Here are a few tips on using stop losses:

• Never trade without a stop loss and if you find the market moving against you, never move the stop loss away from the market to stop it being hit. If you were wrong, you were wrong, don’t lose more money than you need to. It is better to let it take you out of the market and save your capital

• You do not have to close your entire spread bet with the one stop loss order as it is possible to set up two or even more stop losses if you like. For example, if you want you could set a stop 100 points away to reduce your exposure by, say £1 per point and set another stop 200 points away to take you completely out of the market. Just tell your spread betting company how you want to set it up

• Use stop losses to lock in profits too. If, for example, you find you were correct and the market is moving the way you want to and you are in profit, rather than cutting your profit entirely you could move your stop loss up so that if the market reverses, you come out of the market with a small profit. That way, you can relax knowing you were right and even if the market reverses, you have locked in some profit