Risk management tools
Leverage is one of the key advantages of CFD trading, as it allows you access to the financial markets without having to put up the full value of the position. This can result in significant profits, but potentially also losses as well.
We offer a wide range of risk management tools to help you limit your potential losses.
A Guaranteed Stop is a very effective risk management tool.
You can add a Guaranteed Stop to a position to put an absolute limit on any potential loss. They do no restrict your profit potential. For a small premium you can specify the exact point at which you want to exit a trade and we guarantee that you will not lose more than that amount.
Your position will be closed at exactly your selected level should the market move against you, even if there is a very sharp overnight move.
This type of stop order does not require a premium, however it is different to a Guaranteed Stop because we cannot always guarantee we can close you out at your selected level. If there is a large overnight move, or the market gaps quickly for example, slippage may occur and your position may be closed at a worse level than your selected Stop.
They can be an effective tool to limit your risk, though if you are after absolute protection you should opt for a Guaranteed Stop.
A type of non-guaranteed stop, Trailing Stops are placed a certain distance from your opening price, and remain at that distance when the market moves in your favour. With Trailing Stops, you do not need to manually monitor your position and adjust your stops, allowing you to lock-in profits.
Trailing Stops are free of charge. To use them however, you need to activate them for your account on our trading platform. To do this, simply:
- In ‘My Account’, go to 'Preferences'
- Select 'Allow Trailing Stops'
- Accept the terms and conditions
- Click 'Set Preferences'
A trailing stop check-box will now be visible on your deal ticket for all currency trades, equities, indices, and commodities.
See an example of how a trailing stops work in practice.
Please be aware that a Trailing Stop is a type of Non-Guaranteed Order. During volatile times, the market may move through your Stop, in which case we will exercise our reasonable discretion to determine when Non-Guaranteed Orders are triggered and the level at which they are executed.
A Limit Order is a profit-taking tool, which instructs your trade to close once a specified price has been reached.
Limit Orders allow you to set a profit target, either to an existing position or when opening your trade. These Orders may also protect you from the market turning after your desired price has been reached.
USING CFDs TO HEDGE YOUR PORTFOLIO
Many traders hedge using CFDs as part of their overall risk management strategy.
For example, you have the ability to use a CFD to go short on shares you already physically own. This could offer your physical investment protection if there was a fall in the share price. Therefore, any potential loss made on the shares in the underlying market is balanced by the profit made by the short CFD.
Hedging can eliminate your profit as well as your loss and is known as a defensive strategy.