USING ORDERS TO TRADE

INTRODUCTION PROGRAMME | MODULE 3

USING ORDERS
XTO TRADE
This module introduces Stop and Limit orders
and considers how they can be used to both
open and close positions. Also covered is
the difference between Guaranteed and
non-guaranteed Stops.

JUNE 2016

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 MODULE 3 USING ORDERS TO TRADE

X
CONTENTS
3 USING ORDERS TO TRADE

7 STOP ORDERS

8 ATTACHING A STOP TO AN EXISTING POSITION

11 USING A STOP ORDER TO OPEN A NEW POSITION

13 LIMITED RISK PROTECTION

14 GOING LONG OF JANUARY US LIGHT CRUDE OIL

WITH LIMITED RISK PROTECTION

16 LIMIT ORDERS

17 ATTACHING A LIMIT ORDER ON THE OPENING OF A TRADE

18 LEAVING AN UNATTACHED LIMIT ORDER ON

WOOLWORTHS

19 LEAVING AN UNATTACHED LIMIT ORDER ON

WOOLWORTHS

21 TRAILING STOPS

22 ATTACHING A TRAILING STOP TO A POSITION

25 ADDING A TRAILING STOP TO AN EXISTING POSITION

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 MODULE 3 USING ORDERS TO TRADE

USING ORDERS
TO TRADE
In the examples in Module 1, we looked at placing trades at the current
price. Our prices are constantly moving; if you are happy to deal at the
price we are making at the time, you can deal there and then, but there
may be times when the prevailing price does not suit. Of course you can
keep on watching the price, waiting for a certain level, but it may be
more convenient to leave an instruction to deal should a specified price
requirement be met.

Leaving such an instruction is known as working an order. An order can be left

to open a new position or to close an existing position, either through our
dealing platform or through our dealers (over the telephone).

When dealing in the actual market, for example trading futures contracts
or physical shares, there are many different types of orders, with
varying complexity.

When using our dealing platform, there are two main types of order:
Stops and Limits.

How these are strictly defined in the underlying markets is slightly different to
the definitions given here, but for the purposes of trading with us the following
simple classifications are true:
• A Stop is an instruction to deal at a less favourable level than the current price
• A Limit is an instruction to deal at a more favourable level than the current price
So if Woolworths Holdings Ltd is trading at 8450 and you leave an order to sell
at 8400, the order is a Stop, as selling at 8400 is a worse price (less favourable)
than selling at 8450.

In the same circumstance, if you leave an instruction to sell at 8500, it is a Limit

order, as 8500 is a better level to sell at than 8450.

CONTINUED

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 MODULE 3 USING ORDERS TO TRADE

USING ORDERS
TO TRADE
PROBLEM
You have previously opened a position going long 1000 shares of Woolworths
Holding Limited at 8450. Several days after opening the position Woolworths
Holdings Limited is trading at 4350. You place an order to close your position by
selling 1000 shares should the price of Woolworths Holdings Limited reach 4400.
Is this a Limit or a Stop?

ANSWER
This is a Limit. Our definition of a Limit is an instruction to deal at a more
favourable level than the current price. The current price is 4350 and you are
leaving an order to sell at 4400. Selling at 4400 is more favourable than selling
at 4350, and so it must be a Limit.

A common mistake for people unfamiliar with Stops and Limits is to look at
the opening level of the position, 8450, and to view selling at 4400 as a Stop,
as it is a worse level than the opening level. Had the order been left when the
position was opened, when 8450 was the current price, then it would be a Stop.
In the problem described, however, the opening level is actually irrelevant to
determining whether the order is a Limit or a Stop, as it is not the current price.

ORDERS ON SHARES
For shares, we always quote actual exchange prices. Therefore, orders to trade
share CFDs are activated by actual trades and bid/offer prices in the market.

ORDERS ON OTHER MARKETS

Orders relating to markets other than shares are activated by the bid/offer of our
quote. Examples of how this works in practice are given further on in this module.

CONTINUED

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 MODULE 3 USING ORDERS TO TRADE

USING ORDERS
TO TRADE
ATTACHED AND UNATTACHED ORDERS
As stated earlier, an order can be left to open a new position or to close an
existing position.

If the order is left to close an existing position, the order can be considered to
be ‘attached’ to that position. If you close the position before the order has
been activated, the attached order is cancelled. It is possible to have both
a Limit and a Stop attached to one position; both would be cancelled if you
closed the associated position.

If an order is left to open a new position it can be considered to be ‘unattached’

– it is not attached to an existing trade. For this type of order you need to
consider what the duration of the order will be.

TIME FRAMES OF ORDERS

As we have established, ‘working an order’ is leaving a set of instructions for a
trade to be placed in your absence should certain price conditions be met. So
far we have seen that those instructions contain key pieces of information, such
as the price you are leaving the order at, whether the order is a Stop or a Limit
and whether you are looking to buy or sell.

Another requisite piece of information for orders to open is for how long you
are looking to work the order. You might want the order to last for a few hours,
for a day or indefinitely. This is known as how long the order is good for. This
will either be GTC (Good Till Cancelled) or good till a specified time.

For undated contracts (which do not expire) GTC means that the order
continues to exist until either it is filled or you cancel it. For Expiry Transactions,
GTC orders continue to exist until filled, cancelled or the expiry time is reached.

CONTINUED

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 MODULE 3 USING ORDERS TO TRADE

USING ORDERS
TO TRADE
So if you left a GTC Stop order to buy one contract on Spot EUR/USD
(which is undated and has no expiry) and the order level is never reached nor
do you instruct us to cancel the order, we would continue to work that order
for you indefinitely.

If you left a GTC Stop order to buy one contract of December US Crude
Oil, which is set to expire on, say 16 November, and the order level is never
reached, nor do you instruct us to cancel the order, we would continue to work
that order for you only until 16 November.

The December US Crude Oil contract expires on 16 November (in this

example) and your order is cancelled once the contract expires.

If you are leaving an order online, you need to specify whether the order is
GTC or give a specific time at which you want the order to be cancelled. If you
are not working the order GTC, you can choose to work it until pretty much
any time before the contract’s expiry (if there is an expiry). Many people simply
choose to specify a time over the next 24 hours (a ‘Day order’), however, when
not working the order GTC.

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 MODULE 3 USING ORDERS TO TRADE

STOP ORDERS
As described above, a Stop is an instruction to deal at a worse price than the
current level of that market.

Although the idea of wanting to deal at a worse price than is currently available
might seem a little strange at first, there are plenty of examples of times when
a trader may want to do so.

For example, Stops are frequently attached to open positions as an instruction

to close the trade in the event of an adverse movement. This is often referred
to as a Stop-loss. Closing a trade that is moving against you can often be a
sensible choice (on which there is more in Modules 4, 5 and 6 which discuss,
respectively, Leverage and margin, Attitude to risk and Trading discipline), and
placing a Stop can therefore be useful if you are unable to keep an eye on the
position at all times.

Also, clients sometimes wish to trade should a certain technical resistance or

support level be breached. For example, your chart analysis may suggest to
you that going short of Wall Street is a good idea if it drops below 12,350, a
level that you may have decided is a key resistance level. Placing a Stop order
selling to open at, say, 12,325 would allow you to take a short position should
the index clearly break through the level.

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 MODULE 3 USING ORDERS TO TRADE

EXAMPLE 1

ATTACHING A STOP TO
AN EXISTING POSITION
1 Let’s say that you have already opened a position, long one contract of
Wall Street at 12923.5.

You decide that you want to attach a Stop order to the position to close the
deal should the position move against you.

You decide to place a Stop at 12863.5.

2 To do so, you click on the dash in the ‘Stop’ column: this opens an edit
‘Ticket’ which is populated with the details of the trade, including the deal
reference, and offers you fields in which you can enter order levels. The ‘Current
Level’ field gives you a firm idea of the current Wall Street price. You enter your
Stop level, 12863.5, in the ‘Stop Level’ field. Note that you could also enter a
level for a Limit if you wanted. Orders cannot be placed closer to the current
market level by more than a specific minimum distance, which is indicated.
screen grabs needed
The next step is to click on the ‘Submit’ button.

3 A message comes back telling you that your order has been accepted.
screen grabs needed

4 You can now view your order in the ‘Open Positions’ window.

CONTINUED

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 MODULE 3 USING ORDERS TO TRADE

ATTACHING A STOP TO
AN EXISTING POSITION
The mechanics of how a Stop order works are such that once your
specified Stop level has been touched, you then deal at the current
available bid/offer price following the Stop level being reached. This
means that you are not guaranteed to deal at the level you have specified;
the price you deal at may be worse.

The number of points that you deal at worse than the specified price is known
as ‘slippage’. Factors such as how fast a price is moving, how illiquid the
underlying market is and how many other Stops have been placed at the same
or similar levels can have a bearing on whether you pay any slippage and how
much that slippage is.

You have a position: long one contract of Wall Street at 12923.5 with a Stop
at 12863.5.

You check the price one day and can see that our bid/offer for Wall Street
is 12906.5/12.907.5. The price has moved against you slightly, but you are
comfortable in the knowledge that should there be a strongly adverse
movement your position will be automatically closed out.

A couple of Wall Street bellwethers report disappointing earnings after the

close of the New York Stock Exchange and all the underlying US index futures
(which continue trading after the close of the exchange) trade down markedly.
The US index futures have a strong influence on our Wall Street price and so
our quote drops accordingly; before the figures we are quoting Wall Street at
12881/12882. After the figures our price falls rapidly, dropping below your Stop
level, and your position is closed out.

CONTINUED

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ATTACHING A STOP TO
AN EXISTING POSITION
Our quote for Wall Street around the time your Stop was hit looks like this:

Time (New York) Our Wall Street price

16:15:18 12873.5/12875.5
16:15:23 12872.5/12874.5
16:15:33 12865.5/12867.5
16:15:34 12863.5/12865.5
16:15:35 12861.5/12863.5
16:15:36 12859.5/12861.5
16:15:38 12858.5/12860.5

At 16:15:33 the bid of our quote is 12865.5 and the Stop is still untouched and
the position is still open. At 16:15:34 the bid is 12863.5. The Stop has now been
hit and your position will be closed, although the level at which your position is
to be closed has yet to be determined. The next quote is 12861.5 bid, and it is
at this level that your trade is closed. You have paid two points of slippage.

When you get to work early the next day, you check our quote for Wall Street.
We are making 12828/12830. Although you have paid a bit of slippage, your
Stop has fulfilled its purpose in taking you out of your trade before your losses
became unwieldy and without you having to constantly monitor the market.

You opened your long position at 12923.5 and closed at 12861.5, meaning a loss
of 62 points. One contract means $10 per index point. A 62-point losing trade
therefore equals a loss of 62 x $10 = $620. Had you not placed a Stop on your
position, however, you would be facing a running loss of far greater than this.

CONTINUED

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 MODULE 3 USING ORDERS TO TRADE

EXAMPLE 2

USING A STOP ORDER TO

OPEN A NEW POSITION
1 After studying a three-month chart of Woolworths Holdings Ltd showing
the share price bouncing off a 8600 resistance level, you decide that if the
price clearly breaks above 8600 it is likely to continue moving further upwards.
You therefore decide to place a Stop Order at 8610, buying Woolworths
Holdings Ltd. After navigating to Woolworths you can open the order screen
by selecting ‘Order to Open’ from the dropdown menu as shown.

2 After clicking on ‘Order to Open’, an order screen opens, and populates

with the current level of Woolworths Holdings Ltd.

3 You next type in the order level, which you decided was 8610. You select
the direction of the order as ‘Buy’. Note that as soon as you do so, the
‘Type’ field changes to ‘Stop’. The text is greyed out: whether your order is
a Stop or a Limit is automatically driven by whether you are buying or selling
and the level that you leave. In this case, with the current price below 8610, an
instruction to buy at 8610 has to be a Stop (ie you are buying at a worse level
than the current price).

4 You also need to specify how large the order is: that is, what size trade
you want to open if the order is executed. You enter 1500 shares in the
‘Shares’ box.

CONTINUED

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 MODULE 3 USING ORDERS TO TRADE

USING A STOP ORDER TO

OPEN A NEW POSITION
5 The bottom half of the screen is used to specify the final necessary
detail of the order: namely its duration. This is defaulted to ‘Good Till
Cancelled’, as shown.

If you wanted to work the order good till a specified time, you would need to
click in the ‘DD/MM/YY’ and ‘HH:MM’ boxes and enter, respectively, the date
and time (in the specified format) that you would like the order to expire. The
current date and ‘system’ time is displayed next to ‘Now’ (this is specified in
‘system’ time as our dealing platform can be used across different time zones).
You decide that you want to work the order GTC and so leave the setting at
the default, with ‘Good Till Cancelled’ selected.

As you can see from the screenshot, you do have the option of attaching
contingent orders. You choose not to use this (this option is discussed later in
this module).

Once you have checked that all the details of your order have been entered
correctly you click ‘Submit’.

6 A message is returned saying that your order has been accepted, which
includes a summary of the details, along with a reference number. You
should take a note of this number as a record.

You now have a GTC Stop order to buy 1500 shares of Woolworths Holdings Ltd
at 8610.

Over the next few days, Woolworths continues to range-trade between

8550 and 8600.

One day the Woolworths price climbs out of its recent range and by mid-
session is trading at 8609. The next price that trades on the Johannesburg
Stock Exchange is 8611. Your Stop is activated and you will open a position
at the next price in adequate size to justify filling your order. Woolworths
Holdings Ltd continues to trade several times at the same price and, therefore,
you open a deal at 8611. In other words, you have paid 1 point of slippage.

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 MODULE 3 USING ORDERS TO TRADE

LIMITED RISK
PROTECTION
As illustrated in the examples above, Stop orders are subject to slippage,
whereby your trade can be executed at a worse value than the order level.

Now, this can be a vital consideration: often you may be attaching a Stop to a
trade precisely because you want to manage your risk and ensure your losses do
not exceed a set amount. When there is the potential for slippage, however, there
is no way to guarantee that this will be the case (in CFD jargon, Stop orders as
described above are regularly referred to as non-guaranteed Stops).

We offer a special kind of Stop order that is guaranteed to always be executed

at your level and to never allow any slippage to occur.

Guaranteed Stops are always attached orders, and are always attached on the
opening of the trade. The Stop and the trade can therefore be viewed as one
package. Consequently, you cannot cancel the Stop on a Limited Risk trade (a
Stop is cancelled as soon as you close the trade to which it is attached, however).

Guaranteed Stops clearly offer better protection than a normal Stop, and for this
reason there is an extra cost, akin to an insurance premium, for that extra security.

For CFD trades where we charge a commission (namely shares) the premium is
charged as an additional one-off commission on the opening leg of the trade.

For CFD trades where we do not charge a commission, but simply quote a
dealing spread, the premium is charged as additional points of spread that are
added on to the offer (if you are buying) or subtracted from the bid (if you are
selling) when you open a deal.

Let’s take a look at an example.

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EXAMPLE 3

GOING LONG OF JANUARY

US LIGHT CRUDE OIL WITH
LIMITED RISK PROTECTION
1 With ongoing instability in the Middle East, you consider the oil price
to be capable of going higher than the current price which is around
50/barrel. At the same time, you are well aware that you are dealing with a
market that has exhibited plenty of volatility for an extended period. With
this in mind, you resolve to take a long position and are happy to pay the few
extra points of spread in return for the added safety that it will afford you.

Navigating to the Crude section as shown, you are offered several Crude Oil
contracts to deal on. You could choose to deal on the Oil - Brent Crude (an
expiry CFD that settles against a futures contract that trades in the UK), but
you have been following the price of the US Light Crude Oil price and so,
naturally, it makes more sense to trade this contract. You decide to deal on
the ‘AUG - 16’ contract.

Clicking on the green button (or on the market name) opens a ‘Ticket’.

2 Ticking the ‘Guaranteed Stop’ box means that the deal will have Limited
Risk protection and that the Stop you place on the trade will be guaranteed.

When you tick the box, the additional spread that you will pay for Limited Risk
is displayed (in this case it is four points). The bid/offer is showing as 4999/5006.

The Limited Risk premium is added to the offer because you are buying. You
therefore deal at 5006 + 4 = 5010. Had you been selling, the additional spread
would have been subtracted from the bid.

CONTINUED

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 MODULE 3 USING ORDERS TO TRADE

GOING LONG OF JANUARY

US LIGHT CRUDE OIL WITH
LIMITED RISK PROTECTION
3 By selecting ‘Guaranteed Stop’, you automatically check the ‘Force
Open’ box. The ‘Force Open’ option, when selected, causes any deal
you are placing to be opened as a new position, irrespective of your existing
positions (our dealer will normally net off opposing positions in a logical
manner: eg ‘selling’ 1000 shares of Woolworths Holdings Ltd when you have
an open position long 1000 shares of Woolworths Holdings Ltd will leave
you with no position). A Guaranteed Stop can only be placed on an opening
trade, and so by selecting this option you are necessarily ‘forcing’ an
open position.

As well as the size in which you are trading, you also need to specify how
far away you would like your Stop to be from the opening of the deal.

You select 1 contracts as your size and 40 points as your Stop distance
and click ‘Buy’.

4 The price you deal at is 5006 plus the 4 points of spread =5010. Your Stop
is placed 40 points away at 4970. The Stop is guaranteed: no matter what
the market does, you cannot be stopped out at a level worse than your Limited
Risk Stop. One contract is US$10 for every cent/barrel change in price (in other
words, US$10 per point movement of our quote). Your maximum possible loss
is therefore restricted to US$400 (40 points x 1 contract x $10/point).

After you open your position, the US Energy Department reports rising crude
oil supplies and the price of crude drops sharply, falling to a low of 4520.
Your trade is closed at your Stop level of 4970. You have lost $400, but the
Guaranteed Stop has saved you from a far greater loss.

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LIMIT ORDERS
As stated in our earlier definition, a Limit order is an instruction to deal at
a more favourable price than the current level. This is useful for catching
a target level where it would often prove difficult to do so without
committing large periods of time to monitoring the market price.

Just like a Stop order, for the order to be activated the bid (if your order is to ‘sell’)
or offer (if your order is to ‘buy’) of our quote needs to reach your order level.

The requirements for a Limit to be filled can be slightly more stringent,

however. This is because we require there to be sufficient size in any equivalent
underlying market to allow us to hedge our exposure if needed. So for a Limit
order to be filled, the bid or offer of our quote does need to be ‘good in the
size’ that you are looking to deal. For this reason, if you are dealing in larger
sizes, or on less liquid markets, we may fill only part (or none) of a Limit order.

Limit orders can never be filled at a level worse than your order level – with
the exception of Limit orders that are instructions to open trades with Limited
Risk protection. In the case of CFD trades where the Limited Risk premium
is charged as a spread, such trades will be filled at your order level plus the
additional spread that is charged for the benefit of a Guaranteed Stop.

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EXAMPLE 3

ATTACHING A
LIMIT ORDER ON THE
OPENING OF A TRADE
1 You decide to buy one contact of Spot Gold using our CFD trading
service. You navigate to the instrument on our dealing platform and
open a ‘Ticket’.

You enter 1 into the ‘Contracts’ field.

2 In the middle section of the ‘Ticket’ there are ‘Stop’ and ‘Limit’ fields.
The values you enter into these fields determine how far away your
orders are placed relative to where your position is opened.

Entering any value into either of these boxes automatically ticks the ‘Force Open’
box. A Stop or Limit can only be attached to a trade that is to open, and so by
selecting either of these options you are necessarily ‘forcing’ an open position.

Note that attaching a Stop or a Limit is optional: a Stop or Limit will only be
attached if you enter a value in the respective field.

You decide that you would like a Stop order 10 points away and a Limit order
6 points away, and so you enter 10 and 6 as shown (you could have entered just
a Stop level or just a Limit level).

You then click ‘Buy’.

CONTINUED

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ATTACHING A
LIMIT ORDER ON THE
OPENING OF A TRADE
3 You receive an acceptance message summarising the deal you
have placed:

You have bought one contract of Spot Gold at 1720 with a Stop at 1710
(ie 10 points away from where you opened, as requested) and a Limit at 1726
(ie 6 points away from the opening).

The Limit is an instruction to ‘sell’ one contract of Spot Gold, in order to close
your trade, should the bid of our quote reach 1726 (and the quote would
need to be good in this size – this is unlikely to be an issue in the case of this
example because of the small size of the order).

4 Your deal appears in ‘Open Positions’ and you can view your orders in
the ‘Stop’ and ‘Limit’ columns.

A few hours later Spot Gold is trading on the high of the day with a bid/offer of
1726.7/1727.2.

The bid of our quote has reached your Limit to sell and therefore your order is
executed: you sell one contract at the bid price of 1726.7 to close your trade.

You opened at 1720 and sold at 1726.7, making 6.7 points. One contract of
Spot Gold means 100 troy oz, which is $100 per full point.

Your profit is 6.7 x $100 = $670.

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EXAMPLE 4

LEAVING AN UNATTACHED
LIMIT ORDER ON
WOOLWORTHS LTD
1 You have been keeping an eye on the Woolworths share price, which is
currently trading at around the 8710 level, and have noticed a tendency
for it to bounce off resistance around the 8730 level. You therefore decide that
there would be logic in going short at 8730.

The process for opening the order screen is the same as for the earlier
example of creating an opening Stop order: after navigating to Woolworths
in the ‘Live Prices’ section either click on the order or click on the instrument
name and then select ‘Order to Open’ from the menu.

2 You can also select ‘Order to Open’ directly from the navigation tree by
drilling down to the furthest level (ie so that you cannot expand folders
any further) and then clicking on the market name as shown.

3 The functionality works in the same way as for creating an unattached

Stop order: the ‘Current Level’ is displayed in the top right hand
corner of the window. Entering the order level of 8730 and selecting ‘Sell’
automatically determines the order as being a Limit (selling at 8730 is a more
favourable level than the current price of 8704/8715). If you selected ‘Buy’
the order would change to being a Stop (because buying at 8730 would be a
worse level to buy at than the current price). You enter your size, 3000 shares in
this case. You next need to specify the duration of the order.

CONTINUED

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LEAVING AN UNATTACHED
LIMIT ORDER ON
WOOLWORTHS
4 In this case, you decide you’ll work the order for a week. So rather than
selecting ‘Good Till Cancelled’, you enter a specific time by selecting
the radio button next to the time and date boxes and entering 10/06/16
and 14:30. If the order has not been filled by 14:30 on that date, it will be
automatically cancelled.

You also decide that if your order is executed, you would like to have a Stop
attached to the new position. In other words you are instructing us to work a
Stop order, contingent on the Limit order first being filled.

To do this, you simply need to enter a value in the ‘Close Conditions’ section.
This section is optional: you can leave all fields in this section empty if you do
not wish to attach a contingent order. If you tick the ‘Guaranteed Stop’ box
however, it is mandatory to include a contingent Stop distance (by definition, a
Limited Risk trade has to have a Stop).

You enter a Stop distance of 15 points. If your Limit order is executed, the new
position will have a non-guaranteed Stop attached to it 15 points away from
the opening level of the trade.

You click ‘Submit’ and receive a confirmation that your order has been accepted.

5 The share rises sharply over the next few days, trading at a high of 8730
early in the JSE trading session.

When our bid reaches 8728, your order is filled. You sell 3000 shares at 8728 to
open a new position.

You can monitor the status of any orders that you are working by looking at
the ‘Open Positions’ window (clicking on ‘Orders to Open’ at the top of our
dealing platform toggles this window on and off ). Clicking on a position that
appears within the ‘Orders to Open’ screen launches a window that allows you
to edit the order (or delete the order if you would like to cancel the instruction,
provided it is not already in the process of being executed).

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TRAILING STOPS
This is an advanced feature of our dealing platform, which allows you to leave
an instruction to automatically move the level of a Stop order in the direction
of the market following market moves of a certain size in your favour.

These Trailing Stops are always attached orders and are only available on
non-guaranteed Stops.

Trailing Stops are not enabled as a default. Just as with One-click Dealing,
in order to make them available you need to go to ‘Preferences’ in the ‘My
Account’ section of our dealing platform.

Once you have selected ‘Allow Trailing Stops’ and clicked ‘Set Preferences’,
it will instigate a change in your dealing ‘Tickets’, as shown.

Trailing Stops are not available on every market we offer; if there’s no ‘Trailing’
checkbox appear even though you have set your preferences to allow Trailing
Stops, you’re probably attempting to deal on a market for which this kind of
stop isn’t available.

As Trailing Stops cannot be used with trades that have a Guaranteed Stop, if you
tick the ‘Guaranteed Stop’ box the ‘Trailing’ box becomes greyed out and inactive.

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EXAMPLE 5

ATTACHING A TRAILING
STOP TO A POSITION
1 You decide to buy one mini contract of EUR/USD with a Stop placed 20
pips from your opening and fill out a deal ‘Ticket’ accordingly. You also
decide that you would like a Trailing Stop and therefore tick the ‘Trailing’ box
(with the ‘Guaranteed Stop’ box unchecked).

When attaching a normal (non-trailing) Stop to a position, you only specify one
criterion: namely, the distance that the Stop is placed from your opening level.
With our Trailing Stops you still specify the distance (20 points in this example)
and this always governs the closest that your Stop will be from the current
market bid/ offer. There is a second condition, however, called the ‘Step’ that
determines the increment the market needs to move in your favour before the
Stop level is adjusted.

Consequently, ticking the ‘Trailing’ box causes another field to appear, in which
you specify the ‘Step’ (the minimum value is indicated on the ‘Ticket’; please
note that the minimum Step may vary according to market conditions). You
enter 10 points.

You have now stipulated the two required criteria of the Step (that governs
when your Stop is adjusted) and the Distance (that defines how far away the
Stop is placed each time an adjustment occurs following a market movement
in your favour that satisfies the Step).

2 You click ‘Buy’ and receive a confirmation of all the details of the trade.
You have bought one mini contract of EUR/USD at a rate of 1.27544,
with a Trailing Stop with a Distance of 20 points and a Step of 10 points.

CONTINUED

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 MODULE 3 USING ORDERS TO TRADE

ATTACHING A TRAILING
STOP TO A POSITION
3 Your trade appears in the ‘Open Positions’ window, where you can view
the current Stop level: you opened your trade at 1.27544 and the Stop
is placed 20 points (pips) lower, as specified, at 1.27344. In the ‘Type’ column
there appears ‘T (10)’. The ‘T’ shows the type of Stop is Trailing and the ‘10’ in
the brackets indicates the Step (clicking on either the Stop level in the ‘Stop’
column or the figures in the ‘Type’ column will open a ‘Ticket’ that allows you to
amend any or all of the Step, the Distance and the current absolute Stop level).

Straight after you open your deal, EUR/USD drops a touch to 1.27503/1.27513.
Trailing Stops only follow market movements in your favour, so that your Stop
level is not adjusted: it remains, for the time being, at the original level of 1.27344,
maintaining your initial risk of 20 points (excluding any potential slippage).

CONTINUED

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 MODULE 3 USING ORDERS TO TRADE

ATTACHING A TRAILING
STOP TO A POSITION
4 A couple of minutes later, the rate moves up to 1.27568/1.35690.
Although the market has moved in your favour, your Stop level is still not
adjusted, as the market bid is fewer than 10 points higher than your opening
level. For your Stop to be adjusted, the bid needs to move your specified
Step above your opening level.

This happens shortly, as the rate progresses to 1.27685/1.27707. As soon as

the rate hits 1.27644 (your step of 10 points higher than your opening level of
1.27544), your Stop is adjusted. The new level is your specified Distance from
the market at that point. The Distance is 20 points, so that the new level is
1.27644 – 0.00200 = 1.27444. Your Stop will now only be adjusted again if the
bid of our quote moves the Step of 10 points higher than this new level.

Over the next few minutes, the euro continues to strengthen against the dollar,
eventually moving as high as 1.27793/1.28015. At this point your Stop has trailed
the market up to 1.27544. The details of how the amendments have occurred can
be viewed by clicking on the ‘Activity’ button at the top of our dealing platform.
This launches a window which details the specifics of any trades or orders.

5 As shown in the window, as the EUR/USD rate moved higher, your Stop
trailed the market in 10-point increments, always maintaining the 20-point
Distance from the current market bid at the time of the adjustment. At this point,
with your Stop at 1.27544, the bid of the quote would need to move 1.27844
for your Stop to move higher again. The market starts to move lower, however,
slipping down to 1.27536. Your Stop is hit and you deal at market, selling at
1.27544 (the market moves steadily enough for you to pay no slippage).

6 The closure of your trade can be viewed in the ‘Activity’ window. You
opened your trade at 1.27544 and you closed at 1.27544, meaning that
you finished flat overall, making no profit or loss.

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 MODULE 3 USING ORDERS TO TRADE

ADDING A TRAILING
STOP TO AN EXISTING
POSITION
Let’s say that you have already opened a position, long one contract of Wall
Street Cash at 12498, and that you would now like to attach a Trailing Stop to
the position. To do so, you need to open an edit ‘Ticket’. This is done in the
same fashion as is described in the ‘attaching a stop to an existing position’
example (that is, find the position in the ‘Open Positions’ window and click on
the dash in the ‘Stop’ column).

Having already activated your account for Trailing Stops in the ‘Preferences’
section, the edit ‘Ticket’ now contains a ‘Trailing’ checkbox.

You enter your initial Stop level, which you decide will be 12470. To set the
Stop as a Trailing Stop, you tick the ‘Trailing’ box and then specify the two
necessary criteria: in this case, you opt for a Distance of 30 points and a Step
of just 2 points and then click ‘Submit’.

The market moves in your favour, rising to 12500/12502. At this point, the
market bid is 30 points above your Stop level. Your Stop is always maintained
at least 30 points from the market though, as defined by your Distance, so that
your Stop is not adjusted at this point. If the market makes subsequent gains,
however, your Stop will be further from the market than your Distance: if the
market moves as much as your Step, it will consequently be adjusted.

Our Wall Street Cash price does move up further: when it reaches 12502/12504
your Stop is adjusted, being moved as close to the market as the Distance
allows. So it moves 30 points below the bid and is placed at 12472. As long
as the market keeps rising (without fluctuating enough to touch your Stop),
your Stop will keep trailing the market, the level being adjusted each time the
market moves a further 2 points higher. At each one of these Steps, the Stop is
placed 30 points from the bid.

The market trends up in precisely this manner, reaching as high as

12539/12541. The last adjustment to your Stop occurred when the rate was bid
at 12538, placed 30 points lower at 12508. The market next drops drown to
12508/12510. Your Stop is hit and you sell at market, dealing at 12508 (paying
no slippage in this circumstance). You opened your trade by buying at 12498,
and closed by selling at 12508, meaning that you make 10 points. One contract
is worth $10/point, so that your profit is 10 points x $10/point = $100.

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SUMMARY
By now you should:
• Understand the difference between a Stop and a Limit order
and how each order works

X
• Know how to place an unattached order online in order to open
a new position
• Have a basic understanding of the criteria for an order to be filled
• Understand the difference between a non-guaranteed Stop and
a Guaranteed Stop
• Be aware of slippage and when it may apply
• Know how to use Trailing Stops

CFDs are leveraged products. CFD trading may not be suitable for
everyone and can result in losses that exceed your initial deposit, so
please ensure that you fully understand the risks involved.

Please note that although the material contained within our introduction programme is
updated regularly to ensure accuracy, the information given is subject to change, often
without notice, and therefore may not reflect our most current offering. Our examples are
for illustrative purposes only and do not reflect events in the markets. The information is
for guidance only and we accept no liability for its accuracy or otherwise.

IG is a trading name of IG Markets South Africa Ltd. FSP41393

IG
The Place, 1 Sandton Drive,
Sandton, Gauteng, 2196
South Africa

010 344 0051

IG.com

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