Risk Management Tools

TRUMarkets strongly suggests that all CFD traders implement risk management tools when trading CFDs.

As an in-house rule, when we first enter into any trade, we set stop-loss levels to protect the capital outlay for that particular trade. We also inform members of trailed stop levels. That is, moving the stop level during the trade to protect profits and/or to reduce losses. We endeavour to ensure that all communication to you provides enough time for you to action before the market closes.

Click here to view an example

Other Risk Management tools for the CFD Trader

Ideally, the CFD trader would not exceed 4-6 different CFD suggestions at any one time and normally aim to have between 1-3 positions in settled market conditions. This is aimed at mildly diversifying your suggestions to form a easy-to-handle portfolio of positions to ensure that losses incurred on any one trade does not substantially impact upon on the overall trading bank.

In determining the amount to place on each trade, we suggest maintaining a constant dollar value exposure on the underlying position.

This means that whatever the collateral level, your trading results are all equally weighted towards the movement of the underlying stock. This eliminates the risk of one bad highly-leveraged CFD trade eliminating more than one good lower-leveraged CFD trade.

Example:

Assuming you wanted to trade (borrow) $10,000 of CFDs, then at;

5% collateral (20:1 leverage) - $500 is required
10% collateral (10:1 leverage) - $1,000 is required
15% collateral (6.66:1 leverage) - $1,500 is required
17.5% collateral (5.71:1 leverage) - $1,750 is required.