LONDON, January 12, 2012 /PRNewswire/ --
Many new traders are offered limited risk accounts to securely manage their spread betting and CFD trading, but what are the real benefits of opening a limited risk trading account?
One of the most important reasons to open a limited risk trading account is to trade with the knowledge that you can never lose more than the funds you have in your account. Meanwhile a Guaranteed Stop Loss is placed upon every trade to ensure losses are curbed even when the market gaps.
Unlike regular trading accounts, a Limited Risk account is designed to limit risk on all positions by placing a Guaranteed Stop Loss Order. You cannot lose more than your account balance. A small fee is charged for this, but it guarantees to close your trade at the exact level you have determined, regardless of any market gapping.
This gives new traders greater safety when spread betting by helping them to know the maximum amount they can lose on any trade right from the very beginning, thus limiting losses.
This should ensure that new traders can see the benefits of placing spread bets and trading contracts for difference without becoming disheartened by the challenges of learning a new system. Most importantly, Guaranteed Stop Loss Orders not only help to protect your funds, but also protect you against market gapping.
Market gapping can occur in several situations, such as when a market reopens at a higher or lower value than when it closed on the previous day. So while all trading accounts have access to standard stop loss orders which close the trade at the best available price, there is still a risk that the closing price could be different from the stop loss order level if market gapping occurs.
Just like a regular trading account, there are many more trading tools at your disposal to minimise losses and manage profits, including Limit Orders which close out trades at a price that is better than the current market level to help lock in profit targets.
Guaranteed Stops are guaranteed to close your position at the price specified in your Guaranteed Stop Loss Order. Therefore, you cannot lose any more than the funds you deposit. However, you must have sufficient funds in your account to cover the maximum possible loss before you place each trade.
A limited risk account offers extra loss protection and peace of mind when learning to trade so that you can grow in confidence and experience as a trader.
Limited risk accounts are available to new traders only. To learn more and start spread betting, visit: http://www.cityindex.co.uk/learn-to-trade/limited-risk-accounts.aspx
Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
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.
SOURCE City Index