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What are some of the biggest risks involved in cfd trading?

Posted By Robert On Saturday, April 25th, 2015 With 0 Comments

A £10,000 share investment is the same as a £10,000 notional CFD investment in that the maximum downside is £10,000. The difference is the outlay for a CFD in this case could be £1,000. A 5% move in the underlying still represents a £500 profit or loss but a potential 50% return on the initial CFD outlay.

The main risk that clients should be aware is over leverage. In the £10,000 notional value example we used earlier I would advise clients to stick to £10,000 if their normal deal size is that rather than use £10,000 to leverage say 10 times giving an exposure of £100,000. Leverage profits can also mean leveraged losses.

A retail fx trader who succeeds in the markets is rare stuff, that’s for sure. I think the reason for this is mainly that a lot of aspiring traders only think about the benefits of trading, and not about the risk and the hard work that it requires.

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