CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 51% and 89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
What is a guaranteed stop loss in forex trading?
A guaranteed stop loss order (GSLO) is a special type of risk management tool. Unlike a regular stop loss, which can slip in volatile markets, a GSLO ensures your trade is closed at your predefined level, no matter the market conditions. This guarantee comes from the broker itself. For traders navigating unpredictable news events or sudden market spikes, it offers peace of mind.
Imagine trading during a major economic announcement. The price gaps down in an instant. With a standard stop loss, your order might execute much lower than expected. A GSLO removes this risk entirely, making it a powerful tool for risk-conscious traders.
stop_circleMore than one kind of stop
Looking to enhance your trading strategy with flexible risk management? A trailing stop is another method to let you lock in profits while minimizing losses as the market moves in your favor. Check out our guide on the best forex brokers offering trailing stop orders to find the perfect fit for your needs!
How does a guaranteed stop loss work?
When you set a GSLO, the broker essentially commits to absorbing the risk of slippage on your behalf. If the market moves against you beyond your stop price, the broker guarantees the execution at your specified level.
However, this protection often comes with conditions. Brokers may charge a premium for offering the guarantee or impose restrictions, such as allowing GSLOs only on certain account types or limiting their use to specific instruments. Additionally, you may need to set your GSLO at a minimum distance from the current market price to ensure feasibility.
savingsAn example of using a guaranteed stop loss
Imagine you're trading EUR/USD at 1.1000, anticipating a move higher. You set a GSLO at 1.0950 to cap your potential loss at 50 pips. If a major news event causes EUR/USD to gap down to 1.0930 overnight, your GSLO ensures your trade closes exactly at 1.0950, protecting you from the additional 20-pip loss that would occur with a standard stop loss.
Benefits and drawbacks of guaranteed stop-loss orders
The primary benefit of a GSLO is certainty. No matter how chaotic the market gets, you know your loss won’t exceed the predetermined amount. This is particularly helpful in times of extreme volatility, such as during geopolitical tensions or unexpected central bank decisions.
But GSLOs are not without drawbacks. They often come at a higher cost. Some brokers charge an upfront fee, while others embed the cost within wider spreads. Additionally, GSLOs might not be available for all trading instruments or during low-liquidity periods.
Does a guaranteed stop loss cost more?
Yes, it typically does. Brokers offering GSLOs usually charge a premium. This can take the form of a direct fee added to your trade or slightly wider spreads compared to accounts without GSLO options. Some brokers, like IG and City Index, only charge the extra premium if the GSLO is triggered.
This additional cost reflects the broker's increased risk exposure. Essentially, the broker is betting against extreme market movements that might work against their commitment to your set stop price. Before deciding, weigh the cost against the potential savings from avoiding slippage during volatile periods.
Do all brokers offer guaranteed stop losses?
No, not all brokers offer guaranteed stop losses. GSLOs are a niche feature, more commonly found in brokers targeting retail traders seeking added protection. Brokers focusing on advanced or institutional traders might avoid offering GSLOs due to the operational risks involved.
If a GSLO is essential to your strategy, prioritize brokers that clearly advertise this feature. Check their terms to ensure the conditions suit your trading style.
Do brokers who offer guaranteed stop losses provide them for every security?
Not necessarily. Most brokers restrict GSLOs to specific instruments, often focusing on popular forex pairs or high-liquidity indices. Exotic currency pairs, commodities, or less-traded securities might not qualify.
The broker's rationale is simple: volatile or thinly traded assets make it harder to guarantee order execution at the stop price. If you trade across a diverse range of assets, ensure the broker’s GSLO policy covers your preferred instruments.
Is a guaranteed stop loss right for your trading strategy?
The answer depends on your risk tolerance and trading goals. If you’re a short-term trader navigating volatile markets or news events, a GSLO can be a game-changer. It ensures you can calculate your maximum loss with certainty.
However, if you’re a swing or position trader, the cost of a GSLO might erode profitability over time. For these strategies, standard risk management techniques like diversified positions and traditional stop losses might suffice.
As traders, we’ve seen GSLOs work wonders during flash crashes and critical news events. But we've also observed traders overpay for the protection without facing significant slippage. Understanding your risk profile is key to making this decision.
BrokerNotes.co 2024 Overall Rankings
To recap, here are our top forex brokers for 2024, sorted by Overall ranking.
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At BrokerNotes.co, our data-driven online broker reviews are based on our extensive testing of brokers, platforms, products, technologies, and third-party trading tools. Our product testing extends to the quality and availability of educational content, market research resources, and the accessibility and capabilities of mobile platforms and trading apps. We also dive into each broker’s trading costs, such as VIP rebates, inactivity fees, custody fees, bid/ask spreads, and other fee-based data points.
Steven Hatzakis, an industry veteran with decades of experience in the forex market, leads the BrokerNotes research team. All BrokerNotes content is researched, fact-checked, and edited by the research team.
All websites and web-based platforms are tested using the latest version of the Google Chrome browser. Our Desktop PCs run Windows 11, and we use MacBook Pro laptops running the latest version of macOS to test trading on the go. We test mobile apps and products using iPhones running iOS 17 and Samsung devices running Android OS 14.
Note: The online brokers on our site provide the ability to trade forex in one or more ways, such as non-deliverable spot forex (i.e., rolling spot contracts), contracts for difference (CFD), or other derivatives such as futures. The availability of specific markets or features will depend on your country of residence and the broker's applicable brand or entity that services your account(s).
Forex Risk Disclaimer
There is a very high degree of risk involved in trading securities. With respect to margin-based foreign exchange trading, off-exchange derivatives, and cryptocurrencies, there is considerable exposure to risk, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or related instrument. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable, or that they will not result in losses. Learn more about foreign exchange risk.
About the Editorial Team
BrokerNotes.co provides unbiased forex broker reviews and ratings to help traders and investors find the best broker for their needs. All content is researched, fact-checked, and edited by our research team and all ratings and rankings are based on the team’s in-depth product testing.
Joey Shadeck is the Content Strategist and Research Analyst for BrokerNotes.co and ForexBrokers.com. He holds dual degrees in Finance and Marketing from Oakland University, and has been an active trader and investor for close to ten years. An industry veteran, Joey obtains and verifies data, conducts research, and analyzes and validates our content.
Jeff Anberg is a Staff Editor at BrokerNotes.co and ForexBrokers.com. Along with years of experience in media distribution at a global newsroom, Jeff has a versatile knowledge base encompassing the technology and financial markets. He is a long-time active investor and engages in research on emerging markets like cryptocurrency. Jeff holds a Bachelor’s Degree in English Literature with a minor in Philosophy from San Francisco State University.
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