Placing Trades

If you think that the market is going to rise in a particular product, you may wish to enter into a spread trade to buy (go long) the relevant instrument. In contrast, if your opinion is that the market a particular product is going to fall, you can enter into a spread trade to sell (go short) the instrument.

In order to execute a trade, you will need to enter the stake of your spread trade on the dealing system, or call our dealing team. You will need to have the required margin deposited in your account to maintain this position. Further details on margin requirements.

If you have a Limited Risk Account, a guaranteed stop order will automatically be attached to your Trade and will limit your potential losses to the level of the stop order. If you have a Standard Account and you wish to limit your losses, you can choose to attach a guaranteed stop order to your trade by selecting this on the dealing system. More details of the spread trading account types.

Forward spread trades are all rolled into the next contract, with the exception of forward trades with attached guaranteed stop orders which are closed at the expiry date and time for the relevant trades.

For examples please see Placing Spread Trades and Spread Trading Examples

Placing Orders

In addition to placing trades with Spread Co which are executed immediately, you may also place the following orders with Spread Co:

1. Limit Orders
   Limit orders are usually used to open a new position or close an existing position at a predetermined price.
    
2. Stop Orders
   Stop orders are usually used to limit losses on open positions.
    
   There are two types of stop orders: standard stop orders and guaranteed stop orders. Limited Risk Account trades automatically include a guaranteed stop order when the trade is opened.
    
   Standard stop orders can be used to limit losses or to open a new trade. Guaranteed stop orders can only be used to limit your losses.
    
   A stop order will be triggered if at any time the relevant dealing price we are quoting is at, or moves through, the level of the stop order.
    
   At times it will not be possible for the stop order to be transacted at the level specified of the stop order. If you have a standard stop order, your order may be transacted at a level worse than the level specified in the order. All such fills will be determined by Spread Co bases on what we believe to be fair and reasonable. This may happen when there is thin liquidity, on market opening or when the markets are moving very quickly. In certain markets our quotations will reflect the movements in the futures markets and not the level of the index of the quote.
    
   This is in contrast to a guaranteed stop order which guarantees your losses to the level of the order, even if the market has fallen to a level worse than the level specified in your order.
    
3. Contingent Orders
   A Contingent Order is an order dependant on a primary action.
    
   You are able to place an order to open as a stop or a limit, with a Contingent Order linked to this. The contingent order can be a stop and/or a limit order, if a single stop or limit is placed this is only activated after the primary order has been filled. If a stop and limit order is placed as a contingent order then these are treated as a One Cancel the Other (OCO) and whichever contingent is executed first the other will be cancelled.
    
   For example, you place a primary order to stake £5 per point to buy US30 at 7400. You also put in contingent order to sell US30 at 7500 OCO 7300.
    
   US30 is trading at 7394/7400 and your primary order is executed. You now have an open position at 7400 which has an attached limit order at 7500 and stop order at 7300. If US30 rise to 7500, your limit order is executed and your open position will be closed at 7500 and the stop order at 7300 will be automatically cancelled. On the other hand, if US30 drops to 7300, your stop order is executed and your open position will be closed at 7300 and the limit order at 7500 will be automatically cancelled.
    
4. MOC – Market on Close Orders
   MOC orders are orders to close the position at the official market close time. They may only be placed by you with Spread Co by phone and cannot be placed or cancelled within the last hour of market trading. The Market Information Sheet contains further details of MOC orders.

Telephone Trading

In addition to trading with Spread Co via the online dealing system, Saturn Trader, you may trade over the phone at no additional cost. However, we suggest that, if possible, you use the Saturn Trader to execute trades for faster execution and up to date real-time pricing.

If you are planning to trade over the phone there are various factors which you must be aware of prior to contacting the dealing desk in order to minimise errors and delay during a fast. When calling the dealing desk you must:

• Know your account number
• Know the market that you want to trade
• Know the tenor of the market: spot or quarterly
• Know you are buying or selling
• Know the stake size that you wish to place

Margin requirement

If you wish to place a trade, you will need to put down a 'deposit' in respect of each opening trade in your account. These 'deposits' are also known as "Margin". The margin for opening a Spread Bet for all trades other than those with an attached guaranteed stop order depends on two variables:

1. Notional Trade Requirement (NTR)
   The NTR is actually a risk factor applied to each financial instrument. This factor varies according to the liquidity and the volatility of each financial instrument. Markets which have higher liquidity and lower volatility generally have a lower NTR.
    
   The NTR for indices, foreign exchange, commodities and bullion is the risk factor applied to the relevant financial instrument. The NTR for equities is a percentage of the notional value of your trade. Details of the actual NTR for a financial instrument can be found on the trading platform.
2. Stake
   When you place your trade, you will need to decide how much you wish to trade per point. You can trade £1, £3, £5 or £10, or any amount you like per point on any financial instrument. This amount is known as a stake. You can also choose to trade in USD or Euros. The minimum stake size is 1, based on the currency unit of your account.
    
   For example, you place a buy trade at £5 per point on the UK100 at 6000 and the price of the UK100 rises to 6035. If you close your trade at 6035, you will make a profit of (6035 – 6000) *5 = £175 (assuming no buy / sell spread for the purpose of the example). If you do not close your trade at 6035 and instead allow the UK100 to rise further to 6048 before you close your trade, you will make a profit of (6048 – 6000) x £5 = £240.
    
   In contrast, if you place a buy trade at a stake of £5 per point on the UK100 at 6000 and the price of the UK100 falls to 5983. If you close your trade at 5983, you will make a loss of (6000 – 5983) *5 = £85 (assuming no buy / sell spread for the purpose of the example). If you do not close your trade at 5983 and instead allow the UK100 to fall further to 5951 before you close your trade, you will make a loss of (6000 – 5951) x £5 = £-245.
    
   The size of your stake determines how much you make or lose for one unit movement in the price of a financial instrument. The more the price of the financial instrument moves in your favour, the more profit you make and similarly the more the price moves against you, the more you lose. For this reason, it is important that you understand that if the price of the financial instrument moves substantially in the opposite direction, your losses can increase considerably.

Margin for Indices, Foreign Exchange Currencies, Commodities and Bullion Trades

For indices, foreign exchange, commodities and bullion trades without attached guaranteed stop orders, margin is calculated by multiplying the NTR by the stake.

For indices, foreign exchange, commodities and bullion trades with attached guaranteed stop orders, the margin requirement is equal to the maximum loss that you can incur on that trade.

 

Margin for Equity Trades

For equity trades without attached guaranteed stop orders, margin is calculated by multiplying the NTR by the stake by the trade price for the relevant equity.

For equity trades with attached guaranteed stop orders the margin requirement is equal to the maximum loss that you can incur on that trade.

Margin call

If your account valuation is lower than the total amount of margin required for all your open trades, you will be on margin call. A margin call email will be sent to you to request you to either top up your account with additional cash (this raises your account valuation) or to close part or all of your open trade(s) (this lowers your margin requirements). See an example of a margin call.

Margin calls are to let you know that you have insufficient funds to support your open trades and that you need to introduce more funds or reduce your open trades so that you have sufficient margin. By responding quickly to margin calls, you can prevent liquidation from taking place.

Note: No margin calls will be sent to holders of Limited Risk Accounts even if the trading resources of the account fall below the margin requirement. This is because each open trade has an associated guaranteed stop order and hence, as the holder of this type of account, you will have the funds available in your account up to the level of the guaranteed stop order and will not be exposed to any further risk.

Account valuation

Your account valuation is the approximate value of your account if you were to close and match all of your trades and withdraw all of your funds.

Account valuation = cash balance +/- open Profit & Loss +/- closed Profit & Loss

Open Profit & Loss is the real time value of the profit/losses on your open trades while closed Profit & Loss is the day's realised profit/losses.

Trading resources

Your trading resources are the cash that you have not utilised for fulfilling margin requirements. This is therefore the amount available for you to use as margin requirement for new trades.

Trading resources = account valuation - margin requirements

Liquidation

Liquidation is the forced closure or reduction of your open trades. Liquidation occurs when your trading resources fall significantly below the level required to maintain your margin requirements. To learn more about liquidation, please go to the FAQ section of the website.

How to Calculate Profits/Losses

Your profit or loss is simply the difference between the opening price and the closing price of your trade, multiplied by your stake.