Guaranteed stop loss


    What is a guaranteed stop loss order?

    guaranteed stop loss is a special type of stop loss that protects traders from market gaps that can happen between trading periods when the price can rise or fall dramatically.

    When a trader sets this order, he or she is telling a broker at which point to buy or sell a security. This can help the trader avoid making excessive losses and lock in profit.

    To learn more about how and where to place stop losses, read our lesson:

    Differentiation from regular stop losses

    Regular stop loss orders are not always triggered when the markets are closed. During these closed periods, it is possible for unexpected events, such as terrorist attacks or natural disasters, to send price soaring higher or lower. When the markets open again, the market has ‘gapped’, stop losses have been leap-frogged and investors can be left vulnerable to huge losses.

    Not all brokers offer guaranteed stop losses. However, those who do offer these special orders usually charge a premium on the spread in order to keep the position open over the market close. It is also likely that the broker would require a higher margin level on the account. This may mean that you have to deposit extra funds into your account.