Types of Spread Betting Orders

Understanding the Different Types of Spread Betting Orders:

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Besides the standard instant execution orders whereby you contact your spread betting broker in order to buy or sell spread bets directly, there are a number of other types of orders that you can select when trading the spread betting markets.

To make money and be successful at spread betting using underlying assets, such as the FTSE and NASDAQ, etc., you need to acquire a good understanding of these different types of orders, their advantages and disadvantages and the optimum time to utilize them.

The following lesson provides an explanation of the following spread betting orders:

  1. Instant Execution Orders
  2. Limit Orders
  3. Stop-Loss Orders
  4. Trailing Stops
  5. Once Cancels the Other (OCOs)
  6. Market on the Close (MTC)
  7. Good Till Cancelled (GTC)

1. Instant Execution Orders

Just as it sounds, these are the basic orders whereby you contact your broker and place your spread bets online after receiving a spread offer. You are able to instigate new trades at any time so that you can enjoy a significant degree of flexibility whenever you use instant execution orders.  This type of order is ideal for beginners because of its simplicity.  These orders can have expiry times targeting the end of the day or until you manually cancel them yourself.

 2. Limit Orders

Limit orders are automatic instructions to your broker telling it to execute orders (buy or sell) once a stock reaches are pre-determined price.

For example, if you set a buy limit order then your broker will automatically execute a long spread bet for you once the specified stock drops to a certain price.  Likewise, a short spread bet order will sell an asset once it reaches a certain price, such as a 10 point rise.  The advantage of limit orders is that you can program them to be automatic so that you broker will buy or sell on your behalf without any further instructions from you.  The disadvantage is that if there is a lack of movement in the market, your orders will not be activated.  For more information about placing limit orders, we suggest reading this article.

3. Stop Loss Orders

Stop loss orders are very popular in spread betting.  This is because they protect your capital by instructing your spread betting broker to sell on your behalf if the price of your chosen asset falls to a certain level (e.g. 10% in value).  This tool is very beneficial because it reduces your financial risk exposure and prevents you from suffering a big loss if the value of your selected asset suddenly plunges.  Unfortunately, stop-loss orders are not guaranteed by many spread betting brokers which implies that you could suffer losses from slippage, especially if the prevailing market conditions are very volatile.

4. Trailing Stop

A trailing stop is a dynamic stop-loss order which follows the price movement of market.  This tool allows you to lock in profits when assets are advancing in well-defined trends.  You can customize your trailing stop by entering its Stop Distance (the distance between the entry point and your stop-loss.) and its Step Size (the increment size that the stop-loss can advance).

Consequently, a trailing stop can assist you locking in profits while your spread bet remains active. This important tool removes the requirement for you to constantly track your spread bets and move your stop-losses manually.

5. OCO (One Cancels the Other)

An OCO is two orders that are linked to each other.  For example, you can combine a stop-loss order with a buy limit order to create one single spread bet.  When one of the orders is executed, it automatically triggers the other.  This type of order is beneficial because it can prevent heavy losses while allowing your profits to run.

6. Market on Close Order (MOC)

An MOC is an order to close your position at the end of the business day or at another specified time.  Many financial traders aim to complete each trading day with no orders active so that they are not holding any bets open during the night. They prefer to go home and start with a fresh sheet the next day. They do not want the liability of unsupervised spread bets active during the night. The MOC is the ideal order to use to achieve such objectives.

7. Good Till Cancelled(GTC)

This type of order means that your bets will remain active indefinitely until you close them yourself.  GTCs are especially valuable for supporting long term investments. However, their main disadvantage is that they can generate serious losses if you forget to service them properly and the price of your underlying asset suddenly moves sharply against your positions.

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