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• Limits and alerts
• Buy/sell limits
• Stop-loss limits
• Tracking stop-loss limit
• Limit safeguard

Limit safeguard

Limit safeguard – how does it work?

A limit safeguard protects your stop-loss or tracking stop-loss limits from unnecessarily executing a deal where the bid/offer spread is volatile.  This is particularly useful when the market is in the first minutes of opening and the last minutes of closing, times when bid/offer spreads can momentarily widen dramatically. 

Limit safeguard uses a ‘normal’ range of movement in the spread relative to the price of the share – the higher the price, the narrower the acceptable spread and vice versa.  Spreads of 5% or less are classified as ‘normal’ regardless of the mid-price.  For mid-prices of £10.00 or lower, we apply a sliding scale, as shown in the chart below, to determine the ‘normal’ spread. 

Limit safeguard is not available for shares with a mid-price of less than 20p.

If the share’s bid/offer spread falls outside the ‘normal’ range, limit safeguard will prevent the stop-loss or tracking stop-loss from selling the shares.

Limit safeguard example

You own shares in Company A and in Company B and you have set limits on both investments to sell once the bid price (price to sell) falls below £3.95.

Both shares have a mid-price of £4.00.  Company A’s bid/offer spread is £3.90– £4.10 (ie. 5%) and Company B’s bid/offer spread is £3.74 – £4.26 (ie. 13%). Both bid prices have fallen below the limit you have set at which you would like to sell (ie. £3.95). However, only the limit on Company A will trigger a sale. Why is this?

• The limit on Company A will trigger a sale as the spread is normal (5% in this example)
• The limit on Company B will not trigger a sale because the bid-offer spread is greater than the normal spread (13% in this example)

How can I set a limit safeguard?

Existing customers can set a limit safeguard when placing stop-loss and tracking stop-loss limits, or add it to an existing unexecuted order.