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Hargreaves Lansdown

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

What are the risks?

Unlike most traditional financial trading services, CFDs are a leveraged product. This means that your initial margin payment gives you exposure to a comparatively larger portion of an underlying market than if you bought the instrument directly (via a stockbroker for example).

Leverage is a key advantage of CFD trading; it enables you to profit from a market without having to put up the full value of the position. However, this magnified exposure also means that CFDs can result in losses that exceed your initial deposit.

How leverage works

How do I manage risk?

Understand your market

Before placing a trade, you should know your market and assess its probability of volatile movement. This is crucial in calculating the potential risk of the trade. Historically, some markets have shown a tendency to jump less suddenly, however there are others, such as equities, which are more prone to making quick, pronounced moves (often caused by profit warnings or company news).

Monitor your open positions

Volatile markets can move hundreds of points in the space of minutes. A good understanding of your market is a start, but you should actively monitor your account so that you can react to any sudden market moves.

Use stop and limit orders

It may not always be possible to micro-manage your open positions, which is why our range of stop orders are a vital part of your risk management armoury.

The most effective way to manage risk is to use guaranteed stops, which, in return for an upfront premium, put a fixed limit on your potential loss without putting a cap on your profit.

Next steps

Find out more about our Introduction programme, which allows you to start trading on reduced deal sizes so you can limit your exposure as you build your trading confidence.

Open a CFD account

Important information

Spread Betting and CFD trading carry a high level of risk to your capital; you should ensure you understand the risks involved. Please read the full risk warning.

Why HL Markets?

  • Award-winning platform
  • Access thousands of markets
  • Free education
  • Tight spreads

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