Opening Orders

Posted By Robert On Thursday, December 12th, 2013 With 0 Comments

If you are, or intend to become, one of those spread bettors who sits in front of your trading screen(s) all day looking for opportunities to place a trade manually when the time is right then you can rely on the spread betting platforms’ trading tickets. If you are more laid back – okay, let’s admit it, employed in your day job – so that you can only review your potential trades each evening (or at the weekend) then you will need to utilise opening orders that get you into a long or short position automatically when the price hits a particular level.

An opening order ticket such as the Capital Spreads New Order ticket shown below is similar to the trading ticket we met in the previous chapter and the Closing Orders ticket shown in the previous section. Like a trading ticket, the New Order ticket is (usually*) used for opening a new position; like the Closing Orders ticket, the New Order ticket specifies a future purchase or sale to take place when a particular price is reached.

* note that a trading ticket or an opening order may in fact close an existing trade if one already exists in the opposite direction; i.e. a short £1-per-point trade or opening order, when executed, will close an existing long £1-per-point bet that you have in play on the same market.

Order Ticket courtesy of Capital Spreads (prices for demonstration only)

Opening Order

This New Order ticket states your intention to BUY Chime Communications automatically at £1-per-point when the price falls from the Current Price of 151.7 to a LEVEL of 145.

The lower half of the ticket becomes relevant only if and when the price falls to the required level and the order executes. The STOP and LIMIT orders are contingent orders that will be created automatically when this order executes, so that your newly-opened position will subsequently be closed at a profit (the LIMIT) or at a defined loss (the STOP).

In a nutshell: This New Order ticket will cause you to “go long” at a price of 145 and then subsequently exit for a profit of £35 (if the price rises to 180) or exit for a loss of £10 (if the price falls to 135).

Here is what an IG Index opening order ticket for a similar intended trade looks like at the time of writing. In this case the long position will be opened (if it is at all) at a lower price of 135.

Example Order Ticket courtesy of IG Index (prices for demonstration only)

Chime Communications

Note that in this case the Type of opening order is specifically indicated as Limit. This has nothing to do with the contingent Limit order detailed in the lower half of the ticket; it merely details the fact that any order to “buy” when the price falls to a specified level is a Limit order. In this context: any order to sell when the price rises is also a limit order whereas any order to sell when the price falls is a stop order and any order to buy when the price rises is also a stop order. Since these rules are a matter of fact rather than choice, the order type is simply deduced in the first (Capital Spreads) order ticket from your combination of direction (buy or sell) and price level.

Opening Orders are “Good Until”…

Opening orders are standing orders that are good until you cancel them, or until a specified time is reached which causes them to lapse. For example: you may which to buy into Chime Communications if the price falls to 145 (in the first example) or 135 (in the second example) providing it does so today or within a month.

The IG Index ticket includes a Time in Force section allowing you to specify that your opening order is Good Till it is Cancelled or until a particular Date/Time is reached. The earlier Capital Spreads ticket has a separate tab labelled “Until” for the same purpose.

Trading with Triggers

Suppose you want to consider placing a trade when a particular financial instrument falls to a certain price, but you simply want to be notified when this price event occurs rather than entering a trade automatically using an opening order. Some spread betting platforms provide a “triggers” facility that will notify you via email (and in some cases via SMS text message) when a particular price event occurs.

For my concrete example: let’s suppose I want to be notified if ever the American S&P Index falls by 2% within any given day, which I might consider to be an overreaction. In the following Capital Spreads chart I am in the process of adding a trigger for exactly this event.

Price Chart with Trigger courtesy of Capital Spreads (prices are indicative)

Trading with Triggers

This chart-driven example leads us naturally onto the subject of charts

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