CFD Trading Guide to Managing Risk for New Traders

LONDON, March 20, 2012 /PRNewswire/ --

CFD trading with City Index makes trading the markets more accessible for new traders, enabling them to maximise their market involvement with exposure to a range of financial instruments. Through its low margin feature, new traders can have access to these features and more whilst paying only a small fraction of the total trade value as a deposit.

However, low margin is a double edged sword; it presents significant risk in that you could incur losses greater than your initial deposit.

Here, our CFD trading guide aims to help both new and experienced traders manage their risk whilst

trading with City Index.

Solid Trading Strategy

Before placing a trade, it is imperative that traders develop a comprehensive trading strategy.

This trading strategy should aim to outline where you want to take profits and most significantly, where you are willing to take a loss.

These points should be realistic and must be adhered to whether trading through a downloadable or browser-based platform or mobile App.

Once you have decided at which point you are willing to take both a profit and a loss, you might want to apply orders.

Apply an Order

As mentioned above, now that your strategy is in place and you know at which points you are realistically willing to take both a profit and a loss - you can put in place a stop loss and limit order.

By fixing your stop loss to your loss target and assigning a limit order to your profit target, your risk is notably reduced and you can also reduce the level of stress that can come with trading.

As a City Index CFD trader, you can benefit from a Standard and Guaranteed stop loss order.

A guaranteed stop loss is an order to close out a position at a level prearranged by you. It offers the greatest protection; in particular when/if market gapping occurs.

You do incur a small charge for this protection, which can vary across different markets.

Knowledge is Power

As the saying goes, knowledge is power - and it could not be truer in regards to CFD trading.

Understanding your market is fundamental to your trading success and limiting your risk.

By watching and analysing your market's price movement, you can start to learn what affects it, where underlying volatility may or does occur and forthcoming announcements that may impact its price.

With this knowledge, you have the power to react quickly and correctly when news emerges and the market moves.

This is another way of deciding where to place your stop loss and limit orders during your strategy.

Summary

Investors choosing to trade CFDs with City Index can access a range of features that will help them stay safe whilst trading a wide range of financial markets. It is advisable to utilise a demo trading account with City Index before you start trading: http://www.cityindex.co.uk/learn-to-trade/demo-account.aspx

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support.