When you trade Bitcoin Futures you’re trading on margin. So you’re using leverage to gain exposure to a potentially higher profit. This approach also means that your potential loss could be many times greater than your initial outlay. We call this an investment risk.
To help you manage this risk, there are useful risk management features included in your Spread Co account.
Some of them are free to use so it’s worthwhile using them with your positions. Here’s how they work.
These can let you put a limit on your potential loss, and also to lock-in profits when they reach a particular level. The good news is that two of the main spread betting risk management features — stop loss and limit orders — come at no extra cost. So it’s easy to use them with all of your trades.
you probably have an idea of how much you’re prepared to risk if the market doesn’t move in the direction you anticipate.
You can manage this using a stop loss, which lets you set a price at which your trade will automatically close. This would be lower than your buy price if you’re going long, and higher than your sell price if you go short.
But with a stop loss there’s no guarantee that your trade will be closed at that price, especially in volatile markets. If the market ‘gaps’, your order will be filled at the first available price.
you might be comfortable closing your positions manually when you reach your desired profit level.
If you can’t do this, you might be better placing a limit order.
This means your trade will close automatically when your position reaches a particular price.
So, if the price moves in the opposite of the direction you predicted, a stop loss will give you some protection and limit your losses.
You can apply a stop loss to all positions with Spread Co.
Using Stop Loss and Limit Orders Together, Using these features together with your trades can help you manage the risks associated with Bitcoin Futures trading.
You can adjust your stop loss and limit order values to take account of changing market conditions without having to close your trades.
| Limit Order | Stop Loss |
|---|---|
| Bitcoin Futures price falls to your Limit Order value £12,500 | Bitcoin Futures price rises to the Stop Loss value of £14,000 |
| Original bid price minus your limit order price multiplied by stake per point: | Original bid price minus your stop loss price multiplied by stake per point: |
| ((13,250 – £12,500) x £1) / 10 | ((13,250 -14,000) x £1) / 10 |
| Financing = £0 (Zero financing on Future Markets) | Financing = £0 (Zero financing on Future Markets) |
| Profit £75 | Loss £75 |