Guaranteed stop-loss

A guaranteed stop-loss order (often shortened to GSLO) is a product offered by some CFD and spread betting providers. An ordinary stop-loss becomes a market order when triggered and can fill at a worse price if the market gaps or moves quickly. A guaranteed stop closes the position at exactly the stated level, whatever happens to the price.

Because the provider absorbs the gap risk, there is usually a cost. Common arrangements include:

• a premium charged only if the stop is triggered, or a wider spread on the trade;
• a minimum distance between the current price and the stop level;
• restrictions on moving or removing the stop once set.

The name describes the fill mechanism, not the outcome of the trade: a guaranteed stop still closes the trade at a loss.

Example

Illustrative figures: you are long one standard lot of EUR/USD at 1.0850 (about $10 a pip) with a stop at 1.0800, a planned loss of $500. Over a weekend, news pushes the pair down and it opens on Monday at 1.0750.

• Ordinary stop: fills around 1.0750, so the loss is about $1,000, double what you planned.
• Guaranteed stop: closes at 1.0800, a loss of $500 plus whatever premium the provider charges.

Points to weigh

• Gaps are relatively rare in major currency pairs but more common around weekends, central bank surprises and in individual shares. The gap risk guide explains when they happen.
• Availability varies by provider, product, platform and account; they are not offered everywhere.
• Negative balance protection limits losses to your deposit; a guaranteed stop limits the loss on a single position. They are different protections.

Check the provider's terms for the exact charge before relying on one.