Whether you use a shorter term trading strategy or feel more comfortable with an approach that focuses on longer term gains, a smart risk management approach should be a fundamental part of your overall Shares trading plan.
In this chapter, we’ll look at some of our powerful risk management tools to help you set a level of risk you’re comfortable with.
What risk management tools can I use then trading Shares?
A Stop Loss Order can be attached to your position by selecting the ‘Stop’ option from the trade ticket and choosing the exact amount in points or P&L which you would like to risk.
Once you have selected the price point you are comfortable with and your position is live, we will close out your trade when the market price moves through your chosen limit. You should consider adding a Stop Loss to all of your Shares trades to protect yourself against market volatility.
It is important to remember that while standard stop losses protect you against losses past your predetermined price point, they do not protect you against excessive market volatility and market gapping.
A Guaranteed Stop offers you the greatest level of protection possible should the market move against you. Guaranteed Stops will close your position automatically at the price you have chosen, irrespective of market gapping or volatility.
To use a Guaranteed Stop Loss on a Share trade, you will need to pay a small premium, but we offer free Guaranteed Stops* on a number of other markets such as:
- Germany 30
- Wall Street
- UK 100
- SP 500
- US Tech 100
- Brent Crude
You can set your free Guaranteed Stop during these selected times.
Trailing Stops allow you to lock in profits and minimise losses by “tracking” market movement. This means that you set a price level above or below market value at which you’d like your position to be closed out. Your Trailing Stop will then move with the prevailing market trend and close out your position at the price difference between market price and the Stop that you have defined.
Technical and fundamental analysis
Shares Trading is one of the asset classes which requires the greatest amount of research. There is a wealth of data and information available to investors to help with trading decisions including economic data releases, company earnings reports and indicators.
When trading Shares a blend of both technical and fundamental analysis can be a powerful combination as together the data and insights gleaned form your research will help build up holistic view of the company as well as the wider sector in which it operates.
This is important as it may help you to manage your risk by highlighting potential sell-offs and preparing for downturns in market prices.
In addition, our powerful indicators, drawing tools and charts will help you track price changes over a number of time frames, giving you deep insight into how volatile the market is so that you can adjust your trading strategy accordingly.
*Free Guaranteed Stops are only free at certain times, on some markets for retail clients only - click here
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