Use guaranteed stops to conjure additional trading funds out of thin air!

Like me, you may occasionally find yourself in the embarrassing position of wanting to make a trade in your spread betting account at a time when you have little or no “available to trade” trading funds. Like me, you may prefer your spread betting account(s) to be self-sufficient and therefore you’re reluctant to feed yet more new money into your account.

You may have noticed that very often you can free up additional trading funds by applying stop orders to existing trades that didn’t already have them, or by ratcheting up (on long trades) or down (on short trades) your existing stop orders. Many spread betting companies free up more of your cash for trading when their computers see that you are taking less risk by employing stop orders.

In many cases you can go one better by guaranteeing your stop orders so that the spread betting companies know exactly how much risk you are taking. It’s difficult to demonstrate this phenomenon in spread betting accounts that oblige you to specify that your attached stop order is guaranteed (or not) at the outset, because you have no way of knowing how your free “trading resources” would have been affected if you had made the other choice. However, in a Capital Spreads or InterTrader account you can apply a guarantee to your stop order retrospectively on an existing position to see the effect.

As a quick experiment this morning I checked the Guaranteed check box next to the existing stop order on a token £1-per-point Thomas Cook position, to see my Trading Resources figure jump immediately by £2. I didn’t change the stop level at all, and in effect I made £2 worth of additional trading funds available for the £0.15 cost of the guarantee. I repeated the exercise on a Taylor Wimpey position, thereby raising another £5 worth of trading funds out of thin air (well, at a cost of £0.41). And again, and again, on other stock positions. Obviously you can scale up these figures to your own tastes.

So if you’re ever in need of additional trading funds, try raising or guaranteeing your stop orders rather than depositing more cash. But remember that to apply a guarantee retrospectively on any existing trade you’ll need to be running a spread betting account provided by Capital Spreads or InterTrader or another brand that is underpinned by the London Capital Group (LCG) trading platform.

Find more spread betting tips and tricks in my Better Spread Betting book, and if you liked this article don’t forget to…

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