Overview of guaranteed stop loss

Discussion in 'Order Execution' started by mercury-croc, May 17, 2022.

  1. Sometimes a stop loss can fail due to slippage when the order price differs from the execution price. This can result in positive slippage, but often traders suffer losses due to negative slippage. Likewise, GSL is effective when trading a volatile market and can prevent losses.
    Pros
    1. Reduces losses
    A guaranteed stop loss allows traders to limit their losses when trading in risky financial markets. It is also a great way to reduce losses in the event of financial news that can affect prices and cause volatility.
    2. Protection of funds from market deficits
    When financial markets open with a lower or higher price the previous day or when they open after a weekend, there can be an up or down market gap.
    3. Effective against slippage
    Slippage is when you place an order at a price, but the order executes at a different price due to volatility. When the market moves too fast, slippage is more likely. If you place a buy order at a price and negative slippage occurs, you buy the asset at a higher price than expected.

    Cons
    1. Comissions
    Many forex brokers charge a fee for using a guaranteed stop loss. This helps protect forex brokers from the losses they incur in the event of a gap down or slippage. For some forex brokers, a guaranteed stop loss is a premium feature.

    Also, sometimes forex traders may pay a premium for a guaranteed stop loss, but it takes a long time to use it. This means that the financial market is operating normally and traders do not need to put in a guaranteed stop loss. Over time, this causes additional costs for forex traders.

    2. Early stop
    If you set a guaranteed stop loss too early and the market fluctuates before resuming a profitable course, you may be stopped out. This means that the broker closes your position and you lose potential profits.

    So this is a sum up of GSL info, but has anyone tried comparing in real conditions?
    Let's share experience!
     
    murray t turtle likes this.
  2. Whenever something is "guaranteed", it costs more.... one way or another.
     
    murray t turtle and KCalhoun like this.
  3. A risk/variable with any stop order... regardless of where you place it.
     
    Handle123 likes this.
  4. Handle123

    Handle123

    When someone mentions "guaranteed", I know they lack knowledge of trading markets, there is nothing in life except death that is guaranteed. I believe it is horrible way to get charge extra to place orders.

    If you set your protective stops too early, most likely lack of backtesting was done to find best stop loss or entry was too early, or both.

    I trade much Forex, but very long term minded. I would never day trade forex cause most dealers produce their own data. Plus, traders so guilible, commission free is not free, you end up paying more cause spreads are wide, that's commission. When I day trade currencies, I prefer using Futures, most brokers charge $5 or less commission. Spreads much tighter. Plus if news report comes out, can hedge position.

    One can place a stop and limit order to stop slippage, might not get filled but won't be paying slippage.

    Between @Scataphagos and myself, we have over 70 years of experience.
     
    murray t turtle and KCalhoun like this.
  5. Don't tell everybody THAT. (Some ETers think that I am still in my 40's.) Young traders don't really want to listen to the "voice of experience". They just think we're a couple of old fogies... "who wants to listen to them?":)
     
  6. %%
    a]LOOKS a LOT like full coverage Property Insurance on an newbie auto ; pays to use it on an overpriced newbie auto,. The bank requires it\ for financed autos.
    [D] DAVE Ramsey says don't even buy a new auto, unless you are a millionaire; so that'$ another way.
    [E]General rule is don't buy any Extended warrenty.
    I did on a drill @ TSCO, only once/ because i tore up a Black Decker drill by severe old age + severe usage which i will not name in public.
    Good thing for TSCO i did not collect on it.
    But i have collected so much on some smaller policies + i got frequency warnings from 2 different companies. Live + Learn LOL:D:D My comments apply only to stocks \stock based ETFs + common sense stuff/ like 21 year old drivers...
     
  7. It's described as an insurance contract and it is very unlikely they made an error when pricing it. The one selling the insurance likely comes out ahead in the long run.
     
  8. Handle123

    Handle123

    I actually read your posts. Thought you started at age TEN.
     
  9. wow, thank you for the opinion!
     
  10. haha, sure, this is why it's unpopular I suppose
     
    #10     May 18, 2022