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STOPLOSS

Stoploss makes it possible to close a long (speculation on the growth of the underlying asset) or, short position (on the contrary, speculation on the decline of the underlying asset) with a predetermined and limited loss. Stoploss is a basic protection against unlimited loss - most contracts are traded almost 24 hours a day, and the open, unprotected position is extremely risky.

How to enter a Stoploss

The Stoploss instruction is entered separately - it is not possible to submit it on the same purchase / sales form as the instruction to the  position (long or short) we are opening. In speculation on the rise of the underlying asset, therefore, a long position needs to be opened first by purchasing a contract. Once the instruction is executed, you can enter a Stoploss sales instruction (sales instruction with a completed Stop Price). The Stop Price MUST be lower than the current contract price! The "Price (points)" field may remain blank - then it is a Stop Market. After activation (when the Stop Price threshold is exceeded), the instruction in question will be executed at any price*. The second option is to fill in the "Price (Points)" field with the worst (limit) price for which the instruction (order) is to be executed. This price must be lower than the Stop Price. In this case, it is a Stop Limit instruction.

Conversely, if we decide to speculate on a decline in the underlying assets, a short position is first opened by selling one or more contracts of the underlying assets (most often without owning it) and only when the sales instruction is executed - i.e. the portfolio shows a negative number of contracts (see picture below) - you may submit a purchase Stoploss (purchase instruction with completed Stop Price). The Stop Price MUST be higher than the current contract price! The "Price (points)" field may remain blank - then it is a Stop Market. After activation (when the Stop Price threshold is exceeded), the instruction in question will be executed at any price*. The second option is to fill in the "Price (Points)" field with the worst (limit) price for which the instruction (order) is to be executed. This price must be higher than the Stop Price. In this case, it is a Stop Limit instruction.

* The price at which the Stop Market order is executed is not, in fact, wholly arbitrary, according to the Stock Exchange rules. For every futures, there is a buffer zone around the Stop Price, where the order can be executed. If the instruction is not executed within this buffer zone, the remaining part is placed on the market with the limit on the edge of the buffer zone. The width of the buffer zone is usually half of the NRR zone (see Stock Exchange Rules below).

RULES

The complete rules governing these smart instructions can be found on the Stock Exchange website, along with other legislation:


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