On the back of client feedback and the success experienced on the IG apps, we have now added the deal position preview functionality to the web dealing platform. This feature is automatically enabled on the new dealing platform. To disable it, right click on the graph and select Position Preview from the “show” dropdown.
What does this feature tell me?
When filling in a deal ticket, new visual features will appear on the graph. When the direction (buy or sell) is selected, a shaded area will appear above (if buying) or below (if selling) the current price. This area will show the price the market needs to touch to profit from the transaction. The shaded area will not start from the price you executed the trade at, as the market needs to move in your favour by the size of the spread before you are at break-even.
- In the example the Buy price is 1239.39
- The blue ‘profit level’ is displayed at the executed deal price +/- the spread
It's important to remember the price level on the chart can either be the bid (buy), mid or ask (sell). For the 'profit level' to work properly will require you to have the correct price level displayed on the chart. You can select this by right clicking on the chart and selecting bid (if you're buying) or ask (if you're selling).
Adding a stop
If a stop is added, a new shaded area will appear in the opposite direction. This will give a visual representation of the range of movement your position has before the stop is triggered and your position is closed out.
Adding a limit
By adding a limit, a risk/reward ratio will appear. This will compare the expected return of the position with the amount of risk undertaken to capture such returns via the ‘Risk/reward ratio’.
What is the risk/reward ratio?
This ratio is used to assess the potential for profit relative to the potential for loss. Risk is determined by a stop loss, and reward is determined by the limit. If the risk/reward metric is 1:5, it means that a trader expects five units of expected return per every unit of additional risk, this gives a ratio of 0.2. If the ratio is greater than 1, then the risk is greater than the potential profit on the trade.
It is important to keep in mind that, whilst a low risk/reward ratio of 0.2 is very attractive, you need to consider the odds that the profit target will be reached before your position is closed out if the stop is triggered.