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| What are stock broking stop & trailing stop orders? |
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Monday, November 5, 2007
A sell stop order is essentially an instruction to a broker to get them to sell a security which is being held, at the best price currently available, should the market value drop below the pre-set stop price. These are traditionally used when investors "go long" in the hope of stock prices rising, and help to reduce any potential loss should the stock price fall beyond the fixed sell stop value. A buy stop order is used typically to limit a potential loss on a short seller speculation, where an investor borrows and then sells a security in the hope of reducing the subsequent market price. Once the price falls, the investor can then buy the stock back at the lower price. This enables the trader to then return the stocks purchased to the lender, in order to profit from the difference between the original selling and repurchase prices. The buy stop order, which is always set above the initial market price, is automatically triggered when the stop price is reached, and is a call for the broker to cease purchasing stock; and so protect the investor against loss, should the price continue to rise. While a standard stop order uses a fixed price to control when it becomes activated, a trailing stop order utilises a dynamic stop parameter. Investors using trailing stop orders specify a price difference or a percentage difference from a benchmark price position. This benchmark is the highest or lowest market price that the stock has reached since the stop order was placed. Trailing stops are used to protect profits as part of a risk management strategy, and will automatically adjust as the market moves in the investors favour. This type of order allows the trader to profit from any favourable movement within the market whilst at the same time having the protection of a stop order to prevent huge losses being accrued. These days it is easy to find a large amount of information online about stock trading terms, through sites such as Wikipedia, it is important to note however that you need to ensure the validity of all information used to make any investments, in order to reduce the risk of potential financial loss. Many of the larger banks such as Barclays Stockbrokers offer regulated sources of information on subjects such as stock stop orders along with stock trading services to all potential market investors. Disclaimer: All information contained in this article, is for general information purposes in the UK only and should not be construed as advice under the Financial Services Act 1986. The price and value of investments and their income fluctuates: you may get back less than the amount you invested. Remember that how an investment performed in the past is not necessarily a guide to how it will perform in the future. You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts. What is life insurance? Life insurance is a financial product that few of us like to think about. We would all like to believe that we are going to live forever, however there comes a point when reality needs to step in and plans are made for the inevitable. Life insurance is intended to provide some level of protection for financially interested parties should the worst happen. This means that cover can be provided for others who will become financially disadvantaged by the death of the insured person. By taking out a life insurance policy, dependants will not have to deal with all the additional hardships which can be caused by the monetary loss of the insured's income or productivity. Life insurance is most frequently taken out to protect family members and replace the breadwinner's salary ensuring that the family home will not be lost, however it can also be used to cover the costs of a paying for the tasks a house person performs on a daily basis, such as child care, housework, gardening, etc. Businesses also commonly take out life insurance policies on their most important employees to protect against any financial losses to the company that could be incurred due to their death. For most people life insurance is used to protect their family by providing a lump sum to pay off any loans or mortgage repayments, so that the family home is protected, or to provide a replacement family income, but it is also often used to help cover funeral expenses, inheritance tax or provide an emergency fund to cover a period of financial instability following the insured's death. There are two broad types of life insurance: term insurance and investment type policies. Term policies are the simplest and generally the cheapest form of cover and will provide protection for a set period, after which the policy will lapse. Investment type policies such whole-of-life insurance, provide cover for as long as the policy holder lives, as well as building up an investment value which can be cashed in by surrendering the policy. When considering what type of life insurance policy is most suitable, it is vital to decide what the purpose of the cover is to be, along with calculating how much cover is required. This is important when choosing the level of the cover needed. The main cover types currently available are: - Level term policies which will pay out a set tax free lump sum upon the policy holder's death and premiums are set at the time the policy is taken out. - Increasing term insurance is similar to a standard level term policy; however the value of the lump sum (and usually the premiums) increases with time to compensate for inflation or rising prices. - Decreasing term is a type of life insurance where the lump sum value reduces over time. This form of cover is usually taken to protect loan or mortgage repayments, where the overall amount required to pay off the loan amount will decrease as regular repayments are made. - Increasable term life insurance provides the option to increase the level of cover in the future, with the corresponding premium increases being based on the policy holder's health at the time of initially taking out the policy without the need for a need medical or major re-evaluation. This type of policy can be useful to provide additional cover following marriage or the birth of a child. - Renewable term insurance enables the term of a policy to be extended when the initial period comes to an end. The premiums to be paid are, like increasable terms, calculated based upon the policy holder's health at the time of the policy being taken out. - Pension-linked term policies such as B-Assured life insurance from Barclays allow the policy holder to claim tax relief on their premium payments, as long as they are eligible to contribute to a personal pension or stakeholder scheme. For a life insurance guide and life insurance comparisons visit Moneynet or view the regular surveys in Which? and specialist personal finance magazines. Disclaimer: All information contained in this article, is for general information purposes only and should not be construed as advice under the Financial Services Act 1986. You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts. Credit cards for students – are they a help or a hindrance? Debt and credit cards have become an inevitable part of a modern UK student's life. With graduate debt running at an average of over £13,000, it is easy to see the appeal of gaining the ability to spread the day to day living costs, putting them off until that high paid post college job appears. Visit most University Freshers Fairs and it will be easy to find several different banks offering student financial services, alongside Virgin and Barclaycard student credit cards, all with low introductory rates, shopping discounts, free CDs, or other new gift idea. Despite having a low irregular income and no credit history, students represent an ideal target for the banks. The reasons that students are desirable as new customers is that over their working lifetime graduates earn on average of £400,000 more than non-graduates UK, combined with the fact that once they have accounts in place, people are generally reluctant to switch to other providers, and so by attracting students early in their financial life, they are liable to remain with the same credit card provider for life. Obtaining a student credit card can also be of great benefit to students, not only by assisting with the daily budgeting, but also by initiating the creation of a credit history that can be used to support future loan and mortgage applications. There are drawbacks however, and it is however important to be remember not to abuse these newly obtained credit facilities, as any credit obtained will always need to be repaid and building up a poor credit history can prove damaging to future finance applications. It should be noted that students are not restricted to just choosing a student credit card, however as some standard credit cards do not require the applicant to maintain a minimum regular income, however there is generally little or no difference between the cards themselves, and the various free extras combined with the ease of obtaining a student credit card rather than a standard one, frequently make student targeted cards a better option. With online fraud protection, travel assistance, online account management, 24 hour helplines and free text alerts set up to notify when payment dates are due, the beneficial reasons for students to obtain a card are numerous, and as long as care is taken to not over use the facilities and repayments are met, then a credit card can provide a useful flexibility for their personal finances. An important point to remember whenever taking out any form of finance is to take the time to compare as many of the currently available deals that are available. With a little care and a simple check on the suitability and interest rates which will be payable, using free credit card comparison services like Moneynet can help to minimise the potential repayment costs involved in the future as well as maximizing the various benefits. Disclaimer: All information contained in this article, is for general information purposes only and should not be construed as advice under the Financial Services Act 1986. You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts. |
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