This is the most basic of order types and is used to exit (or
enter) a market at a price that is worse for the trader than the
price that is currently available. For example if we buy £10
a point of FTSE on a spread bet at the current price offered of
5100 and leave a stop loss at 5050, our exit or closing trade will
be at 5050 if the market falls to that level, resulting in a 50
point loss (or £500, 50 points multiplied by £10 per point).
It is also possible to leave a stop entry order. In the example
above where the current price is 5100 a stop entry order could
be placed to buy £10 per point if the market trades at a price of
5125. Our opening trade will only be executed if the market rises
to this level. Stop entry orders are often used by technical
traders who are keen to ensure a trend or chart pattern is fully
established before initiating a new trade.