IG advises traders to monitor positions closely amid ongoing volatility
IG recommends to its clients to ensure that they are comfortable with the size of their positions heading into the weekend.
Online trading major IG has posted a notice on its blog, advising traders on appropriate action given the ongoing market volatility.
Due to ongoing volatility, there is significant risk that markets may gap when they re-open on Sunday night, the broker warns. Traders should ensure that they are comfortable with the size of their positions heading into the weekend, and also be aware that circuit-breakers may be applied over the coming days.
IG recommends to traders to do the following:
- Monitor your positions closely at all times;
- Ensure you are comfortable with the size of your positions, and the effect that any market gap may have on them;
- Ensure you have sufficient funds on your account to cover your positions in the event of a significant market move.
Regarding circuit-breakers, IG explains that, at times of high volatility, regulated central exchanges may suspend trading on one side of the underlying market. This happened to the Dow Jones Industrial Average this week, for instance. IG follows suit whenever a circuit-breaker occurs.
Circuit-breakers are designed to restrict trading in order to avert market crashes or spikes. The restrictions are called ‘up limits’ or ‘down limits’, depending on the direction that the market has moved. As trading is suspended in the underlying market, it will impact how a client trades with IG.
- An up limit is the maximum amount that the price of a stock index or commodity futures contract will be allowed to increase in a single trading session. If hit, it means that buying will be suspended in the underlying market.
- A down limit sets the maximum amount that the price of a stock index or commodity futures contract will be allowed to decrease in a single trading session. If breached, it means that selling will be suspended in the underlying market.
At IG, when a down limit has occurred, traders will only be able to buy – whether to open or close a position – through phone dealing. In such a case the price may be significantly lower when the market re-opens.
