Volatile market conditions

What you should consider when the markets are volatile in order to minimise your losses

Stop losses

Stop losses trigger and automatically sell an investment if the bid price falls to, or below, a price set by you.

When the markets are volatile, stop losses could be triggered at prices way below the level that you’ve set. This can happen when prices fall quickly through that level. It may be safer to consider removing stop losses during especially volatile market conditions.

If you would like to edit any existing stop losses you have set up, you can do this by signing in, and clicking “Pending investments” from the “My account” menu.

Buy limit orders

When you set a buy limit order, it will trigger and automatically buy an investment if the offer price drops to, or below, a price set by you.

For those actively seeking to benefit from volatile markets, a buy limit order may be worth considering. It may allow investors the potential flexibility to pick up an investment at a significantly reduced price, compared to normal market conditions.

You can read more about setting up limit orders on our dealing guide

Volatility safeguard

Protect your Stop-Loss or Tracking Stop-Loss limit orders against wide price spreads by using the Safeguard feature.

When setting your trigger levels you will want to bear in mind the bid/offer spread of the particular share.

In some market conditions, and particularly at the time of the market's opening or closing, bid/offer spreads can widen, activating a trigger. To avoid this, on shares with a mid price of 20p or more, you can choose to Safeguard your Stop-Loss or Tracking Stop-Loss triggers.

The Safeguard prevents a trigger from activating if the stock's bid/offer spread is outside an acceptable range. Because it is not unusual to see wider spreads on lower priced stocks compared to those with a higher price, the acceptable range narrows as the stock's price increases.

It operates by calculating the spread as a percentage of the 'bid' price and then checking to ensure it falls within an acceptable range. Starting with a maximum acceptable spread of 15%, the range reduces to 5% at a share price of 100p or more.

Safeguards can be set at the time of placing your Stop-Loss or Tracking Stop-Loss order, or can be added to an existing, un-executed order.

Price alerts

You can receive an email alert (or highlight in your account) if an investment rises or falls to an offer price of your choice.

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Please get in touch with our Dealing team.

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