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IG's Guaranteed Stop Loss Orders - Trading strategy

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skyQuake

skyQuake

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IG Markets have a nice little cash cow called a GSLO (Guarantee Stop Loss order) which will force an order to go through at a the specified price even if prices gap past it. (And you pay handsomely for the privilege)
Similar to a barrier oppie/warrant where YOU choose the barrier level...
Problem is that you will pay around 1~2% of order value for this stop with stocks, and its set a min 5% away from current price levels.

Indices its slightly different. For the SPI its 5pts paid as prem (+2 spread) and min stop is 15pts. Although the index rarely gaps 22 pts, there is a way to make the most of it.

Playing morning gaps is farily hard, as a 'straddle' will cost you 14 points outright, and you need a gap of 29pts to break even.. not to mention the horrible spread when night SPI closes in the early morning.

I've been 'straddling' instead public hols and days where the SPI closes early. Eg Aus Day, Christmas etc so there is no night SPI, and you straddle can enjoy the full move of overnight markets. Backtesting is incredibly limited but %success and expectancy is quite high.

Just a strategy to think about at the next public holiday :)
 
Re: IG's Guarantee Stop Loss Orders - Trading strat

Hi Sky

Thanks for the information. I am planning to open an account with IG Markets. I called them Friday to find out how much it costs to trade Australian Shares. The gentleman told me that it is either .01% or $8 which seems quite cheap.

Now I know that all trades are on margin.

Do you know exactly how much it cost to trade ASX shares ?

Thanks
 
Re: IG's Guarantee Stop Loss Orders - Trading strat

the GSL order charge is actually 0.003% so for $10,000 worth its $30 plus $8 in and $8 out thats $46.... which i thinks pretty good cos it removes the risk of a market gapping... the only problem is it has to be a minimum 5% away
 
Re: IG's Guarantee Stop Loss Orders - Trading strat

When you open the acct, don't open it as a 'Limited Risk account'. That forces GSLOs on ALL your trades. including index and fx trades (ie they get tics).
Its ok for shares, but note that GSLOs for different shares may require them to be placed further away (eg 10%) or for up to 2% of the trade value.
 
Re: IG's Guarantee Stop Loss Orders - Trading strat

ok thanks for the tips - do you know what the brokerage is for Australian shares ?

Cheers
.................................................................................
 
Re: IG's Guarantee Stop Loss Orders - Trading strat

OK I just realised - if I open an IG Markets Account - am i actually opening a CFD Account to trade FX ?

Is this the only way to trade FX ?

Cheers
 
Re: IG's Guarantee Stop Loss Orders - Trading strat

skyQuake said:
When you open the acct, don't open it as a 'Limited Risk account'. That forces GSLOs on ALL your trades. including index and fx trades (ie they get tics).
Its ok for shares, but note that GSLOs for different shares may require them to be placed further away (eg 10%) or for up to 2% of the trade value.
Click to expand...

This is an an excellent point. They only permitted me to open LMA because of my locational "risk" and within 12 months i blew up my account from this and a couple of other systematic errors. If you cannot limit your losses to "live to trade another day" then there won't be another day.

Cheers,


CanOz
 
Re: IG's Guarantee Stop Loss Orders - Trading strat

white_goodman said:
the GSL order charge is actually 0.003% so for $10,000 worth its $30 plus $8 in and $8 out thats $46.... which i thinks pretty good cos it removes the risk of a market gapping... the only problem is it has to be a minimum 5% away
Click to expand...

sorry 0.3% which is 0.003
 
skyQuake said:
IG Markets have a nice little cash cow called a GSLO (Guarantee Stop Loss order) which will force an order to go through at a the specified price even if prices gap past it. (And you pay handsomely for the privilege)
Similar to a barrier oppie/warrant where YOU choose the barrier level...
Problem is that you will pay around 1~2% of order value for this stop with stocks, and its set a min 5% away from current price levels.

Indices its slightly different. For the SPI its 5pts paid as prem (+2 spread) and min stop is 15pts. Although the index rarely gaps 22 pts, there is a way to make the most of it.

Playing morning gaps is farily hard, as a 'straddle' will cost you 14 points outright, and you need a gap of 29pts to break even.. not to mention the horrible spread when night SPI closes in the early morning.

I've been 'straddling' instead public hols and days where the SPI closes early. Eg Aus Day, Christmas etc so there is no night SPI, and you straddle can enjoy the full move of overnight markets. Backtesting is incredibly limited but %success and expectancy is quite high.

Just a strategy to think about at the next public holiday :)
Click to expand...

Should be called a Guaranteed Loss. Who are they kidding for crying out loud! At 5% away from market plus 1-2% premium, trading on a 10% margin? I don't think so. You get hit like that and there goes 60-70% of your outlay + brokerage. Some CFDs are margined at 5% - you get hit and theres a margin call coming your way! Not very good risk and money management people.

Regards
kam75
_____________________________
http://www.sharesmadeeasy.com
 
Agree kam75, the Limited Risk accounts are guaranteed to break you. I wouldnt touch GSLO's with a barge pole except to make the holiday trades.
 
If you back test mechanical models accross the top asx200 you will find that a stop loss of about 7-10% of price is optimal, as most stocks don't just rocket up. So a guaranteed stop loss of 7-10% is pretty good, especially when you start trading stocks further afield from the top stocks, which can easily have big bad gaps.
 
i have the GSL account with IG and i find them very useful.... the fee plus the brokerage is still cheaper then commsec...

also i only trade ASX200 so with 5% margin i can place GSL 5% away from current price... its good cos you keep creeping it up and allow the stock to come back a bit without having a stock too tight to let them run..

so i buy $10,000 worth of XYZ

$8 in, $8 out
$30 GSL fee

$500 margin
GSL at $9500

also if it say moves up to $12000 then you can move your GSL up to $11,400 (which incurs no extra fee) which will in turn make your margin required like -900 so it actuallly reduces the margin on other outstanding margins.... i think last week i had circa $60k worth of stock, but my margin was only $500 because i had moved my GSL up...
 
White_Goodman,

Are you saying you make money trading a GSL CFD account??


If so, how many trades are you taking?
 
Your doing well if you making money with that handicap.

You would do much better with a standard account or even better, an IB account.

I opened one(GSL Account) in 2005 with $10,000.
A couple of hundred trades later the account was $9000 and I had spend $6000 on GSL's :eek:

On top of that, I had spent another 4 or 5 thousand on Interest :banghead:

never again.
 
Fair enough mate.
Just remember the odds are really against you though with a GSL account .

You should be able to open up a normal account with $5000.

Maybe even an account at IB?...not sure on the minimum for them.
 
BentRod said:
Fair enough mate.
Just remember the odds are really against you though with a GSL account .

You should be able to open up a normal account with $5000.

Maybe even an account at IB?...not sure on the minimum for them.
Click to expand...

what do you mean by the odds are really against me.. i dont think the fees/brokerage are that high really, im not churning through stock daily
 
You don't actually need a GSL account to have GSL. The normal IG market account gives you the choice of GSLO still.

IMO, GSL is actually a pretty good risk control mechanism when used the right way. It forces you to enter a stop loss when you place the trade, and it GUARANTEES your stop loss level!

You pay $30 dollars on a $10,000 position, so it will pay for itself if the market gaps more than 0.3% on you. In environment these days where Macquarie can move up 15% on day and down 7% the next, GSL seem to worth the extra few bucks. In fact, if the market gaps 10% on you, the reduced loss would pay for the GSL costs for the next 30 trades.
 
Guys,
look at my above example.

Your in fantasy land if you think GSL accounts are viable.

There are times when a GSL should be used, eg- shorting a takeover target, but to use one every trade is crazy when you look at the BROKERAGE that you are paying.:banghead:

I learnt the hard way, just trying to pass on some advice fellas.

Good luck.
 
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