It is possible to make large profits from trading miniCFDs, but equally there is a risk of similar sized losses and losing more than your initial deposit. miniCFDs offers a number of ways to help you maximise your profits and minimise your risk.
Minimise your risk - Stop loss orders
By far the most important risk management tool is the stop loss order available on the miniCFDs website. Stop losses are orders to buy or sell at a worse level than the current market price. Your position is closed automatically if the price reaches and trades at your chosen level. A guaranteed Stop Loss would guarantee your position being closed at that precise price – this carries a cost of 10% of the opening contract value. However, a non-guaranteed Stop Loss (with no charge) can be placed but if the market ‘gaps through’ your level you will be stopped out at the next available traded price.
You bought 200 Vodafone shares at 120p
Contract value on open = 200 x 120p = £240
You are willing to risk £100
£100 divided by 200 shares = 50p per share
So you are prepared for the share price to drop by 50p,
i.e. 120p - 50p = 70p
This means that you would need to place your
stop loss at 70p
If the share price fell to, and traded at, 70p your position would
automatically be closed out
Contract value on close = 200 x 70p = £140
Loss = (£100)
It is good practice to enter the stop loss at the same time that you place your trade; this ensures that your plan is rigidly enforced.
Maximise your profits - Limit orders
Limit orders are orders to buy or sell at a level, which is better than the current market price. Your position is closed automatically if the price reaches your chosen level. Limit orders
are normally used to take profit on a trade.
miniCFD trading carries a high level of risk to your capital. Only speculate with money you can afford to lose. miniCFD trading can be very volatile. Prices may move rapidly against your interests and resulting losses may require further payments to be made. miniCFDs trading may not be suitable for all customers; therefore ensure you fully understand the risks involved, and seek independent advice if necessary.