When trading in many derivatives stop orders are always a recommended function to act as a way of loss management. This holds true for CFD trading too. Contracts for difference trading involves trading on margin, stop loss, stop orders and limit orders permit the opening or closing of positions when and if a particular level is reached.
A stop order is in simple terms an order you've set to purchase in order to sell the CFD when the underlying asset reaches the specific price you've set. There are two forms of this order; buy stop order and a sell stop order. The buy stop order can be used to create a profit on short positions, and is always set at a price above the marketplace price. A sell stop order is placed in a specific price in the event that the marketplace is constantly on the drop.
Stop loss orders have been in spot to help limit or reduce the amount of loss an investor will incur when the market moves against them. The trader will decide the quantity of loss they are willing to accept. The way in which this works is that when an angel investor opens a CFD trading position they will set the stop price. If the underlying asset reaches that price the stop order is placed also it becomes a market order.
Limit orders are used to enter or exit positions. These are used so that the investor doesn't have to pay prices higher or less than the things they desire to on the underlying asset. The limit order implies you're setting restrictions to the minimum and the maximum amounts you are prepared to pay on your positions. These orders in many cases are only permitted to be placed at particular times during the exchange day.
Once the stop-price has been reached, your stop-limit order will become a limit order. This order will be to buy in order to sell your positions at no more or at least the predetermined limit price. As a CFD trader however, you need to understand that in case there isn't an adequate amount of the underlying product at the limit price, you might only get a partial order, as well as in some instances your limit order won't be executed. If you simply receive a part-fill order, the remainder of your position will remain open.
You should anyone whom is trading CFDs to comprehend they know how you can determine and set a stop order. Not doing this can result in extreme risk to ones capital, especially if trading within a highly volatile market.