In this lesson of the Plus500 complete tutorial, we will learn how to place trading orders on Plus500. Remember that the main function of a trading platform is to allow the user to place an order, that is, to execute what the client requires. The order types that can be placed on a trading platform vary and you will find several on the Plus500 platform and all of them are very effective.
The orders that can be executed on Plus500 are:
- Purchase or long orders
- Sell orders or shorts
- Long orders under certain conditions
- Short orders under certain conditions
- Stop Loss orders
- Limit orders
- Trailing Stop Orders
- Guaranteed Stop Orders
- Integration after margin call
We will be explaining each type in more detail below.
Purchase or Long Orders
If you anticipate that the price of a security will move upwards, then what you need to do is to execute a purchase or long order. This way, you will open a “buy” position at a certain time and you will get economic results proportional to the changes in price.
- If the price actually moves upwards, you will get profits proportional to the size of that rise.
- If the price moves below the purchase line, then you will make losses in proportion to the size of the drop.
To proceed with a purchase order on Plus500, just click the “Buy” button that appears in the desired financial product.
Next, you proceed with the completion of the order in the window that opens shortly.
Sell or short orders
Sell orders or more precisely, short orders, should be used when the price of a security is expected to fall. This way, you will open a “sell” position at a given time and obtain economic results in proportion to the changes in price. If the price actually moves downwards, you will make profits in proportion to the size of the fall. If the price moves above the price at the time when the position is opened, then you will make losses in proportion to the size of the rise.
Long and Short Orders Under Certain Conditions
The Plus500 trading platform allows you to execute a long or short order even under the conditions that the user decides. In practice, it allows you to program positions to open upwards or downwards and to activate them only when the rate or the quote reaches a certain share. To help you better understand this step, here’s an example. Let’s start with the figure below:
As you can see, we have taken the Amazon shares as an example on which we consider to make a purchase or the opening of a long position to “play upwards”. As you can see, you can tick the box “Buy only when the rate is”, which means that:
- The platform will only start the buy order when the quote reaches 1,902.88 (while the screenshot was taken when it was 1,896.74).
- 1,902.88 is a value that can be changed by increasing or decreasing it using the + and – buttons.
- 0.32% would be the positive deviation from the current rate (1,902.88). In practice, by starting this order, we would buy only if the stock reached a rise of +0.32%.
In the same but in a perfectly reverse way, this can also apply to sale or short orders. In that case, you may also set a rate that indicates a certain quote while the percentage of decline with respect to the current quote will be calculated for you.
Stop Loss Orders
Now we will discuss one of the most valuable functions of the Plus500 platform and that is making Stop Loss orders. In English, “stop loss” means “block loss” and there is no better summary to explain what this order is for.
With the Stop Loss order, the user can set a maximum loss limit on each individual trade. In practice, the user informs the platform that “if the loss reaches that percentage level, close the position”. In this way, it will be simple to put yourself to the protect oneself to forecast errors and from eventual but sudden collapses or increases in the market.
Because stop loss orders are valid both for the orders to the rise and to fall, remember: they are used to block losses!
Let’s see how you set it up below. We start from the beginning and choose a stock (or any other financial instrument) on which to operate.
We have chosen the Amazon shares, and we have clicked on “Buy”. Next, the following window opened, in which we checked the “Stop loss” box.
As you can see, the position would be closed at 1,850.40 while the current position was 1,896.59. In this example, the position would automatically be blocked if the stock loses 2.76% or with a capital loss of 9.36€.
These values can be modified, so by clicking on the + and – buttons you can set a more elastic or more rigid stop loss.
A tip: do not set an extremely rigid stop loss because the position may close before the price reverses the price and then produces positive results.
Remember that everything we have seen is made for an upward position, this also valid for a downward position in a perfectly opposite way and so instead of fixing a stop loss at a lower level, you will need to fix it at a higher level. However, when you tick the “stop loss” box, the platform will help you to better understand the situation depending on your type of order.
Take profit orders
We now move on to the stop limit order, which is similar to the stop loss, but instead of blocking losses, it block profits. “But how? Should I block profits?”, you almost certainly wondered. That’s the right question. Actually, we’re talking about profit taking.
In practice, stop limit orders are recommended:
- If you have a clear amount of profit of which you would be satisfied
- If your calculations tell you that the price will see a reversal and that therefore it’s not advisable to go too far in that direction
To give an example, this time we change the type of instrument and move on to the indexes. Take for example the CFD on the NASDAQ Index, called US Tech 100.
As you can see, we have set the take profit to 7,800.12 while the current quote is 7,752.60 and that from the calculations that come out in preview under the small bar dedicated to the stop limit. In this way, the profit will be of €16.95, for a rise of the quotation equal to +0.61%.
You may also notice that we have also set the stop loss, this to show you that you can apply for both orders at the same time. In this situation, we will have real automatic trading that will close the position automatically, both if we make a profit and if we suffer a maximum loss that we have set.
Trailing Stop Orders
If you have so far been excited about the great usefulness and practicality of stop loss and stop limit orders, here we go one step further with the Trailing Stop Order. It is not easy to understand it at the first reading but we are sure that you will understand it very well.
Explanation: The Trailing Stop is a function that automatically changes the stop loss level if the market moves in its favor.
Practice: if we set a stop loss to a determined quotation but the market moves in our favor, the Trailing stop will exploit such favorable situation modifying the stop loss and bringing it to an optimized level.
Let’s take an operation on the same index (NASDAQ).
In practice, this order is designed to protect your profits if you have an open position that goes in the right direction, but at the same time, this closes trading as soon as the price changes direction by a specified number of pips. In fact, as you can see, the word “Pip” is highlighted precisely because those 30 are pips, or minimum percentage units. You can set a smaller number of pips (for example 10), to close the position that moved upwards but then reversed 10 pips.
Guaranteed Stop Orders
Guaranteed Stop Orders can automatically close a trade when drastic price movements happen, and the trader’s capital can be in danger.
This order doesn’t apply only to every instrument, but may be available for those with particularly volatile market conditions. An example of this is oil.
Under certain market conditions (e.g. in an unstable market), it is possible that the stop loss order will not be executed at the exact price you have chosen. In this case, there will be a forced closure of the position of the price that has been set even if the market price exceeds it. When the selected level is reached, the position closes automatically.
For the guaranteed stop order an extra cost is charged, which is expressed in a higher spread, as you can see from the following image.
Please note that we have checked the “guaranteed close” box and that the amount of extra spread that is calculated for this request (equal to 2.55) appears.
Before proposing a concrete example, please take the following characteristics of the guaranteed stop into account:
- It can be set on a new position and not on an open one previously
- Can only be activate
- During instrument trading hours
- Cannot be canceled
- The extra spread, once activated, cannot be returned
- Cannot be set beyond certain distances from the current rate (price)
All right, let’s move on to the example.
Suppose the rates of buying or selling of the Oil CFD are €50/€49.8. We buy 10 oil CFDs, with a higher spread of the guaranteed stop order of 1€. We set a guaranteed stop at a sales rate of €45. The rate of sale of Oil drops to €40 (the position will close at €45 and not €40).
At this point:
- The profit/loss for the guaranteed stop will be equal to (€45-€50)* 10 CFDs -1€ = loss of 51€
- The profit/loss without guaranteed stop will be equal to (40€ – 50€) * 10 CFD = loss of 100€
As you can see, that extra euro avoids a further loss of 49€.
Integration after the Margin Call
In the event that equity goes too next to the amount of the maintenance margin, the broker makes a “margin call”. This means a warning by e-mail, sms, telephone that you need to make an integration of your capital in order to maintain a certain safety distance from the margin of maintenance.
If this condition is met, you can proceed in this way:
- You can supplement your capital by making a deposit
- You can close the position that caused the margin call
- You can let the broker, which in case the situation worsens, will automatically close the position
Follow our advice:
- Make sure you don’t get to the margin call. For this purpose, always set the stop losses and and the operational stops (in addition, also a guaranteed stop).
- Periodically check the status of your account
- Manually or automatically close positions that have reached satisfactory profits
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