A stop loss order (order to close open positions in order to prevent further loss) is only one type of order which can be used when spread trading.

There are several other types of order which can be summed up as follows:

Limit Orders

A limit order is used when you would like to buy or sell at a price which is better than where the market is currently trading.

For example: The French CAC is trading at 4000 but you think it will rise slightly before falling. In this case you could leave a limit order to sell at a higher price such as 4100. This order would now be "on limit" and should 4100 be touched, a new short position would be automatically opened.

You can specify how long you would like the order to be open for:

Good Until Cancelled (GTC): This order will be open until it is cancelled or the contract reaches the expiry date (when the order will be deleted)

Good For Today (GFD): This type of order will remain in place until the end of the trading day unless cancelled by you before then.

Good Until Time (GTT): Order is valid until a specific date and time unless it is cancelled before then.

Limit orders can also be used to close your position so that you can take your profits at a specified level.

Contingent or "If Done" Orders

This type of order is used to attach a stop or limit order to a position but only if the original order is filled.

For example: You set an order to buy the Dow at 10,500. In order to automatically add a stop loss to this position if it is filled, you add a Contingent order to attach a stop at 10,300. The stop loss order will only be added to your account if the Dow Jones position is triggered.

This type of order allows you to protect positions which are opened automatically by the bookmaker.

One Cancels the Other (OCO) Orders

This type of order is used if you have two opening orders setup on the same market. If one order is triggered, the other is automatically cancelled.

For example: The Swiss SMI has been trading in a range of 6100 to 6300 but you think that there will be a major move one way or the other. You place two limit orders; one to sell at 6050 and one to buy at 6350. If one order is triggered and a position opened, the other is cancelled.

This type of order can also be used with open positions. If you setup a limit order to take profit and a stop loss to close your position, when one is hit the other is automatically deleted.

Partial Closing Orders

As already discussed in the stop loss part of this guide, orders can be placed to "part close" a position when a specific market level is reached.

This kind of order could be attached to part close your position when you have reached a certain profit goal leaving only half your position open. By using this order you have already locked in a certain amount of profit but your trade is still open with a smaller stake.

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