Before you trade
The risks of trading CFDs, in plain words
A CFD lets a trader follow a price without owning the asset, usually with leverage. Leverage makes both gains and losses larger, so a small price move can take a large part of the money in the account.
In short
- CFDs are complex products. Trading is risky and may not be suitable for everyone.
- Most first-time losses come from position size: too many lots for the money in the account.
- Practise on a demo account first, and trade only with money you can afford to lose.
Leverage and margin
Leverage means the account only needs to hold a part of the position value as margin. With leverage of 1:100, a position worth 10,000 USD needs about 100 USD of margin. If the price moves 1% against the position, the loss is about 100 USD — the whole margin.
Higher leverage does not change how much the price moves; it changes how much money each move adds or removes. Choosing a smaller position size is the most direct way to reduce risk.
Margin call and stop out
When losses reduce the money available in the account, the platform warns with a margin call. If the margin level keeps falling to the stop out level, positions are closed automatically, starting with the one with the largest loss. A stop out locks in the loss; it does not wait for the price to return.
Negative Balance Protection — Clients never lose more than they've deposited.
Trading is risky. Past performance is not an indication of future results.
Gaps, news and slippage
Prices can jump when a market opens after a weekend or during important news. A stop loss is an instruction to close at the next available price, not a guarantee of an exact price: in a fast market it can be filled at a worse level. Excess volatility increases risk further. Be cautious.
Habits that keep risk under control
- Learn the platform on a demo account before using real money.
- Decide the maximum loss for a trade before opening it, and set a stop loss.
- Start with the smallest position size the account allows.
- Do not trade with borrowed money or money needed for bills.
- Do not give anyone access to the account or let anyone “trade for you”.
- Ignore promises of fixed profits, “signals” that cannot lose, or offers to recover lost money — these are typical scams.