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The foreign exchange market is no doubt one of the largest financial markets in the world. The market boasts of more than $5 trillion trades daily. With this figure, the market comes with opportunities for investors and traders. But to access the market, you need to work with a reliable online forex broker. You can take a look at our list of the best forex brokers on the market.
Before you settle for a forex broker, among others, ensure the broker has a guaranteed stop loss. A guaranteed stop loss can be a great risk management tool that you can leverage to prevent the loss of your trading capital.
Table of contents
Guaranteed Stop Loss: What is it
Guaranteed stop loss is a risk management measure that ensures your trade position is always closed at your desired price. At its core, it is meant to protect your trades from capital loss during volatility. In other words, guaranteed stop loss is a risk management tool that executes or closes your order on a particular set level chosen by you.
During a high volatility market’s situation or an economic crisis, the guaranteed stop loss is an automatic instruction that can save you from a deep loss. Guaranteed stop loss removes any risk of slippage, especially when the price at which your order is executed does not match the price at which it was requested. The broker accepts the risk of slippage on your behalf by attaching a guaranteed stop loss.
Top 6 Brokers with Guaranteed Stop Loss
Below is a list of the top brokers with guaranteed stop loss. Please note that the service may not be available in some locations. So before you choose a broker, check if the service is available in your present location.
Round-up of the best brokers with guaranteed stop loss
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Between 74-89% of retail investor accounts lose money when trading CFDs.
You should consider whether you can afford to take the high risk of losing your money
|Additional costs for GSL||Minimum Deposit|
* Value per point x stop premium
** Fixed Number depending on the market x number of CFD or stake charged in a base currency
Guaranteed Stop Loss vs Basic Stop Loss
There are three basic differences between a guaranteed stop loss and a basic stop loss. First, a guaranteed stop loss closes your trade at a pre-specified price level chosen by you, while the normal stop loss closes the trade at the best price available.
Secondly, the basic stop loss is deeply affected by market volatility, while guaranteed stop loss is not and it does not require a complex trading strategy. The third difference between a guaranteed stop loss and the basic stop loss is that if you use the guaranteed stop loss, you may be charged a fee for the service, while the normal stop loss does not present any fee. Therefore, the commissions charged depend on the broker you choose.
Despite the gains of using a stop loss, it still has some drawbacks. One of the drawbacks is that when it is triggered, it does not produce a sale at the stop loss price.
|Features||Guaranteed Stop Loss||Stop Loss|
|Protection from slippage||Yes||No|
|Protection from high volatility||Yes||No|
How does a Guaranteed Stop Loss work
Guaranteed stop loss is a risk management measure that ensures your trade position is always closed at your desired price. To understand how it works, let’s take stocks for example. Supposing you buy stock at $100 and you plan to exit the market once the stock reaches $90. If the stock, for some reason, falls suddenly and there’s not a buyer at the chosen level, the broker may execute the sell order at $89, making you lose just $1 instead of losing your entire capital.
A guaranteed stop loss will automatically close the order $90 regardless of the situation on the market. If you are a trader on the FX market, you already know that 1 pip is a lot of money. And that’s why you see lots of traders jumping to use guaranteed stop loss.
Advantages and downsides of using Guaranteed Stop Loss
A guaranteed stop loss comes with lots of benefits and drawbacks. In this section, we’ll explore the pros and cons of using this service.
- The biggest advantage of using guaranteed stop loss is that it is not affected by market volatility
- Guaranteed stop loss doesn't come with the risk of slippage
- The major drawback of using guaranteed stop loss is that unlike basic stop loss, it comes at a premium
Brokers with guaranteed stop loss FAQs
When would you need a Guaranteed Stop Loss?
There are several reasons why traders need a guaranteed stop loss. You need this service, if you like to trade against the dominant trend. You also need the service if you’re keen on trading with high leverage. Lastly, you need the service if you want to protect your downsides by paying an extra fee.
Is Guaranteed Stop Loss necessary?
Using guaranteed stop loss largely depends on your trading preferences and on your attitude with the associated risks which come with trading. But generally, using the tool can help you protect your investments.
The essence of using a guaranteed stop loss as a forex trader cannot be overemphasized. At the very least, it protects your invested capital from market forces during volatility.
With so many brokers offering this service, this article has been able to highlight the best 6 brokers to choose from. You may also read through our article on the best 10 forex brokers on the market before taking your final decision.
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