Beware… the 8am stop-out!

I’m currently reading The Naked Trader’s Guide to Spread Betting. Not because I need to learn financial spread betting, of course, but because I might spot something that I forgot to mention in my own Better Spread Betting book and which I might therefore want to include in a future second edition. Besides, I ought to have bought at least one copy of Robbie’s book (I previously read it cover-to-cover for free in Waterstones) after he was kind enough to contribute a few tips to the final chapter of my book.

Although The Naked Trader’s Guide to Spread Betting is a little basic for my own needs, I heartily recommend it to first-time spread bettors, and it’s written in an informal style that I like very much (and sometimes try to emulate).

Anyway, no sooner had I read in Chapter 4 about “…the 8am stop-out!” than I encountered one myself. Not for the first time, and no doubt not for the last time, but it seems like a good time to mention it. The following chart tells the story:

Chart courtesy of Capital Spreads

As you can see, mid-afternoon on 11 July I placed a £1-per-point short bet on Britvic at a price of 257p-per-share with a protective stop order at 10 points (or £10) above at 267p. For some reason, I didn’t follow my own advice from my Stop Orders book or the same advice offered in The Naked Trader’s Guide to Spread Betting to review and perhaps widen my “tight” stop orders overnight in case they get triggered on a temporary price spike or temporarily-wide spread the next morning. So I learned my lesson (again!) when I got stopped-out at 8.04am when the markets opened on 12 July. And as usual, the price immediately fell back thus confirming that I need not have allowed myself to have been stopped out at all.

So remember, beware… the 8am stop-out!

Disclaimer: this posting is for general education only; it is not trading advice.