Risk Control and Order Types
Buying and Selling at Market Prices
Customers can use Plus500 to buy and sell CFD instruments at the current market price (within the price spread that is set for the specific instrument). The “market spread” for each CFD instrument is shown in the Buy/Sell pop-up box that appears when you click on “buy” or “sell” in the trader lobby. Plus500 have made various “order types”, available on the Trading Platform to help customers manage risk. Once a customer sets a limit using these order types, Plus500 guarantees them. Limits are especially helpful should your internet connection be interrupted for any reason.
A Stop Limit Order is a way to protect your profits, should the instrument (Forex, Stock, Commodity or Index) rise. The stop limit order instructs Plus500 to sell an instrument when, and if, the instrument reaches a certain price.
Stop Loss – (Maximum Loss)
A Stop Loss Order is a way to protect yourself from a loss, should the instrument (Forex, Stock, Commodity or Index) fall. The Stop Loss Order instructs Plus500 to sell the instrument when, and if, the instrument falls to a certain price.
When the stock hits this price, the Stop Loss Order becomes a Market Order. A Market Order instructs Plus500 to immediately sell at the best possible price. In a volatile market, you may not get exactly the price you wanted, but it should be close.
Protect Your Profits
The Stop Loss Order is used to protect your profits on a stock that is rising. You decide the price you want to close an instrument at and instruct Plus500 to close the position if this price is reached.
There are four ways to enter a Stop Loss Order.
1. You enter a trading price. For example, if your stock is selling at $40 per share, you could enter a Stop Loss Order for $37.50 per share. When the stock price drops to $37.50, it trips the Stop Loss Order and Plus500 sells it.
2. You enter a maximum loss amount. Plus500 will then calculate the relevant Stop Loss price.
3. You enter the distance in Pips from the current price. Plus500 will then calculate the relevant Stop Loss price.
4. You enter a percentage from the current price. Plus500 will then calculate the relevant Stop Loss price.
The Trailing Stop feature allows traders to place a Stop Loss Order which automatically updates to lock in profits as the market moves in the trader’s favour. Trailing Stops can be placed by clicking the 'Advanced' button when creating a 'Market Order'.
There are four ways to enter a Stop Loss Order:
1. You enter a Trailing Stop Price. For example, if your stock is selling at $40 per share, you might enter a Trailing Stop Loss Order at $37.50 per share.
2. You enter a Maximum Loss Amount. Plus500 will then calculate the relevant Trailing Stop.
3. You enter the distance in Pips from the current price. Plus500 will then calculate the relevant Stop Loss price.
4. You enter a percentage from the current price. Plus500 will then calculate the relevant Stop Loss price.
Example of a Trailing Stop:
12.50pm Yahoo is trading at $45.51/$45.73 (Sell/Buy)
12.50pm You enter a market order with Trailing Stop of 50 pips = $0.5 = (-1.1%) to buy 100 Yahoo shares
You buy 100 Yahoo shares at $45.73
Therefore, the initial stop loss will kick in when Yahoo sells at $45.01. ($45.51 – $0.5)
2.05pm Yahoo prices start to quickly rise and reach $47.60 (the new Stop Price changes to $47.10)
3.10pm Yahoo prices continue to rise and reach $49.75 (the new Stop Price changes to $49.25)
4.15pm Yahoo prices start to dive quickly and reach $42.51. As you had a Stop Price set at $49.25, Plus500 executed the Stop Loss at this figure. Stop Loss Executed.
Profit Summary: 100* ($49.25–$45.73) = $352. (If you had not set a Trailing Stop, and only had a Stop Loss, you would have sustained a large loss.)
Entry Orders are executed the moment the market price reaches your specified price and opens a new position. The price can be above or below the current trading price.
There are four types of Entry Orders:
1. Entry-Limit-Buy: wait until the price goes lower than the current price (used in buying).
2. Entry-Stop-Buy: wait until the price goes higher than the current price (used in buying).
3. Entry-Limit-Sell (going short): wait until the price goes higher than the current price (used in selling).
4. Entry-Stop-Sell (going short): wait until the price goes lower than the current price (used in selling).
For example, if you want to buy Google shares, but not until the price drops to $450, you would place an Entry-limit Buy Order at $450. If the price never drops to that level, then the order will remain unexecuted, but it will remain a pending order until you cancel it.
To create a new Entry Order with Plus500 simply:
-> Go to the main trading lobby
-> Click on 'Buy' or 'Sell'
-> Click on 'Advanced'
-> Complete the relevant entry order
-> Click on 'Buy'