What is a stop-loss order?

A stop-loss order, or stop, is an instruction to close your position automatically when the underlying market reaches a set price that is less favourable than the current price. Attaching a stop can reduce your losses if the market moves against you, making it a useful risk-management tool.

Markets can move quickly, and maximising profit while minimising loss in volatile markets is a key part of successful trading. A stop-loss order helps you to do just that – enabling you to decide a point at which the level of loss becomes unacceptable to you. If the market reaches this point, your stop will be triggered and your position closed.

How a stop-loss order works

A stop-loss order works by pulling the plug on your trade if it loses you a certain amount of money – an amount that’s set by you at the outset.

For example, let’s say you own 100 shares in a company, which you bought at 370p each. But the share price has declined to 350p. Though you hope this is a temporary blip, you decide to place a stop-loss order at 320p, to cut your losses if the price drops any further.

The price does keep declining to 270p, but your stop is triggered at 320p and your position is closed. You have lost £50 (100 x 50p), but without your stop you would have been faced with a potential loss of £100 or more. Attaching a stop has prevented your losses increasing beyond the point you are comfortable with.

If the price had recovered before it hit 320p, your stop would never have been triggered and your position would still be open.

Potential drawbacks to stops

However, say that this decline had been temporary, and the market had risen again after hitting 320p. You could have lost out on potential profit, as your stop-loss order would have closed the trade before it returned to profit.

Using a stop-loss strategy can help you identify the right places to put stops to ensure your trades are reaching their potential, while helping to protect you against escalating losses.

Another potential drawback to using a basic stop is slippage. Certain conditions may cause the market to ‘gap’, jumping from one price to another, and this volatility may mean it is not possible to place your trade at the level requested. In this situation, your stop will be closed at the best available price, but you may risk losing more money than you had anticipated – this is known as slippage.

Say that the shares (in the example above) closed on Friday at a share price of 330p, but opened again the following Sunday at 310p. Your stop would have triggered at 320p, but your position would have closed at 310p – the next best available price.

Other types of stops

In addition to basic stops, there are other types of stop-losses available to traders. It is important to consider what level of risk you are happy with when selecting which stop to use, as they can work in different ways.

• Guaranteed stops: similar to basic stops, except not affected by slippage. Attaching a guaranteed stop-loss order puts an absolute cap on your potential loss, so that even if the market gaps suddenly, you will have no unexpected loss. If your guaranteed stop is triggered, you’ll have to pay a small premium
• Trailing stops: follow the market if it moves in your favour, and locks if the market moves against you. You’ll need to enter a trailing step that indicates how closely the stop moves behind the market price. For example, if your step size is ten points, then every time the market moves up five points, your stop will move five points to follow it

Stop order vs limit order

A stop-loss order tells your provider to buy or sell an asset at a particular price that is less favourable than the current price. They are the opposite of limit orders, which instruct your provider to buy or sell at a price more favourable than the current price.

While stop-loss orders close positions, it is also possible to open a trade with stops – using a stop-entry order. Opening a trade at a worse price than the current asset price can enable you to take advantage of market momentum.

Any type of stop-loss order – basic, guaranteed or trailing – can be hugely useful as you trade financial markets, but stops should only form a part of your risk management strategy.

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What is margin in trading?

Did you know that you could speculate on financial markets with just a small deposit? This is called margin trading, and it could make your capital go further. Learn more about margin in trading and find out how to get started.

What is margin in trading?

Margin in trading is the deposit required to open and maintain a leveraged position using products such as CFDs and spread bets. When trading on margin, you will get full market exposure by putting up just a fraction of a trade’s full value. The amount of margin required will usually be given as a percentage.

There are two types of margin to consider when you’re trading: initial margin and maintenance margin. The initial margin is the deposit required to open the position, often called the deposit margin or just the deposit. Maintenance margin is the money that must be available in your account to fund the present value of the position and cover any running losses.

How does trading on margin work?

Trading on margin works by enabling you to open a position while only committing a fraction of the total cost upfront. The margin is determined by your trading provider’s margin system, and the amount of capital required will depend on the derivative being used and the market being traded. Markets with higher volatility or larger positions may require a bigger deposit. Margin requirements reflect your leverage. For example, if the margin requirement is 5%, the leverage is 20:1, and if the margin requirement is 10%, the leverage is 10:1.

Once you have opened your position, you might need to add more money if your trade starts to incur a loss and your initial margin is no longer enough to keep the position open. If this happens, your provider will place you on margin call, and you’ll be required to top up the funds in your account – this is the additional capital known as maintenance margin.

If you’re ready to start trading on margin, open a live trading account today. You can also create a demo account to see how it works before committing your funds.

Example of buying on margin

Let’s say that you want to buy £1000 worth of shares of company ABC, but you don’t want to put down the full amount. By deciding to trade on margin, you’d only need a fraction of this cost up front to get exposure to £1000 worth of shares. If your trading broker requires, for example, 20% of the position to be put forward as a margin, then the initial amount needed for the trade would be £200 (£1000 x 20%). In this example, your leverage would be 5:1.

Pros and cons of margin in trading

Pros of margin in trading

Margin can magnify your profits, as any gains on your position are calculated from the full exposure of the trade, not just the margin you put up as deposit. Buying on margin means that you have the potential to spread your capital even further, as you can diversify your positions over a wider array of markets.

Cons of margin in trading

Although margin can magnify profits, it can also amplify losses if the market moves against you. This is because your loss is calculated from the full value of the position. However, there are steps that can be taken to mitigate the negative side of margin, such as implementing a risk management strategy.

What to bear in mind before trading on margin

• Trading on margin means you only have to put down a deposit to open a position
• You could either get your deposit back and make a profit or lose it and make a loss. This will depend on whether the market moves in your favour
• The amount of margin you are required to put down depends on the asset being traded, the derivative you choose, as well as the amount of total capital you have available in your account
• Because margin increases your exposure, you have more buying power, but this could magnify both your profits and your losses
• If your margin deposit has fallen below the minimum requirement, your trading broker may notify you and you will have to fund your account immediately
• If you don’t fund your account with a maintenance margin, your positions will be closed, and you will be responsible for the loss (ie you will owe money to your broker)
• You can use risk management tools, such as stop-losses, to minimise any risk of experiencing margin call
• Always make sure you understand the margin requirements before entering a trade

What margin rates are offered by IG?

IG offers tiered margin rates, which means we apply different margin requirements at different levels of exposure. Our margin rates can range between 3.33% to 50%. If you are a professional client, you will qualify for preferential margin rates as low as 0.45%.

Here, you’ll see an example of margin rates when trading popular forex pairs 

You can see a comprehensive summary of margin rates for our most popular markets here.

How to start trading on margin

To start trading on margin, follow these steps:

1. Create an IG trading account or log in to your existing account
2. Choose whether to spread bet or trade CFDs
3. Search the asset you want to trade and select it
4. Choose your position size
5. Click on ‘buy’ or ‘sell’ in the deal ticket and confirm the trade

Note: When you select your position size, your margin will automatically populate at the bottom of the deal ticket.

Open a Live account  today.

FTSE 100 opening and closing times: when can you trade?

FTSE 100 trading hours are derived from the London Stock Exchange opening and closing times. However, you can also trade the FTSE 100 out of market hours with IG. Get more information on the index’s trading hours in this guide.

What are the opening and closing times of the FTSE 100?

The FTSE 100 opens at 8am and closes at 4.30pm UK time (GMT), Monday to Friday. This is in line with the London Stock Exchange (LSE) opening and closing times. There is no lunch period during which trading ceases.

With IG, you can trade the FTSE 100 non-stop between 11.02pm on Sunday and 10pm on Friday. We also offers exclusive weekend trading hours for the FTSE 100, meaning you can trade the index on a Saturday and Sunday with us. We’re the only UK provider to offer this service. 

Above is a breakdown of the index’s trading hours. The FTSE 100’s exchange hours are based on the London Stock Exchange (LSE) opening times. The LSE is the stock exchange that manages the FTSE 100 index and where its constituents are listed. These hours are most relevant to investors looking to buy FTSE 100 ETFs or shares.

FTSE 100 futures continue to trade outside of the FTSE 100 exchange’s hours and allow traders to get greater exposure to the index through derivatives. They are priced according to the spot value of the underlying market, plus any spread or commission that you pay for executing your trade.

IG’s FTSE 100 market is derived from futures hours and pricing but are longer, giving traders even more opportunity to realise a profit. Note that the market is priced differently if you trade FTSE 100 futures compared to trading the index out of hours. FTSE 100 weekend prices are quoted separately to its weekday counterpart.

• _{Data is based on analysis of the FTSE 100 offering from prominent UK competitor websites and is correct to the best of our ability as of 26 March 2020. Table for comparative purposes only. Data is subject to change.}

Note that you can’t trade the FTSE 100 on Christmas Day, New Year’s Day, Good Friday, or other days which are holidays in the UK. And, if these holidays fall on a Monday, you can’t start trading again on the preceding Sunday night. For trading hours specific to FTSE 100 constituents, open the IG trading platform and check the ‘market info’ tab on the deal ticket of the individual share.

FTSE 100 pre and post-market trading hours

IG offers pre- and post-market trading hours for the FTSE 100, from 11.02pm on a Sunday to 10pm on a Friday. We also offer weekend trading hours, from 8am on Saturday to 10.40pm on Sunday (UK time).

Positions open at 10.40pm on a Sunday will roll over into weekday positions when the market resumes at 11.02pm on Sunday. Any stops or limits on weekend positions will remain in place during the roll-over.

Weekend trading enables you to speculate on market developments over the weekend without having to alter your weekday positions. And, if there is any breaking news about ongoing issues or central bank announcements, you don’t have to wait until markets open on a Monday to trade.

The FTSE 100 weekend market is called ‘Weekend FTSE 100’, whereas the weekday equivalent is simply called ‘FTSE 100’. Further, the weekend prices for the FTSE 100 are quoted separately to its weekday counterpart. As a result, you can use these markets to hedge against risk on your weekday positions.

When is the best time to trade the FTSE 100?

Typically, the best time to trade the FTSE 100 is when the market is most active. This is often just after the open of the London Stock Exchange at 8am (UK time). At this time, liquidity and volatility will likely be high as traders begin interacting with each other.

The FTSE 100 also tends to be more liquid and volatile following earnings announcements of companies within the index. Keep an eye on our economic calendar for other developments that may impact the index.

Another point to keep in mind is that the FTSE 100 will be more liquid when there is a crossover between trading hours in different geographic locations. This is especially true during the overlap between the UK and European markets, which are open during almost identical hours.

Remember, some traders prefer high volatility, while others do not. Regardless of your trading style and when you choose to trade the FTSE, it’s important to follow your trading plan and have a risk management strategy in place.

What are the ways to take a position on the FTSE 100?

There are different ways to take a position on the FTSE 100, depending on your personal preference and risk tolerance. Trading is the only way to get direct exposure to the index’s price movements. If you want to gain exposure to the FTSE 100, you can use spread bets or CFDs to speculate on upward or downward price movements.

Alternatively, you can invest in the index by either buying shares in ETFs that track the price of the index or shares of individual constituents. Your aim will be to make a profit when you sell these shares at a later date.

¹ Based off FTSE 100 futures pricing.
² IG’s ‘weekend FTSE 100’ market is a separate market to the weekday ‘FTSE 100’ market and prices are quoted separately.