Risk management

The CMC Tracker platform helps you manage the inherent risks of trading more efficiently with our advanced risk-management tools.

Successful investing requires an effective risk management strategy. With spread betting it is possible to make both substantial losses as well as substantial profits, particularly if you are a beginner. Our platform is equipped with advanced risk management tools that can help you maximise profits and minimise losses. You can minimise losses caused by prices moving against you by setting stop losses on your transactions. By doing this you will know upfront exactly how much you are willing to lose and how much you aim to make from each transaction.

Understanding the risks

Remember, stop loss orders can help you manage your risk but they won’t eliminate risk entirely.

Please do take the time to read the risk warning for CFD trading and the risk warning for financial spread betting.

When you invest in CFDs or spread betting, you are trading or betting on the real time movement of a financial market. The markets can move quickly throughout the day and so the value of your account can also change quickly.

To profit from trading with CFDs or from spread betting you have to get the market direction right. This goes without saying, but it is equally important that you understand how to manage your risk.

You can lose more than your initial deposit. The amount of any loss for an individual position may exceed the amount of margin or deposit that you used to enter into that position. This is a feature of ‘leveraged’ instruments. With CFDs, if you have taken advantage of the ability to use variable margin, you face the same risks.

Knowledge is power

It’s impossible to eliminate risk entirely, but you can use stop loss orders to manage those risks.
Remember:
Use the transaction based stop loss feature - every time you open a position the platform will set a stop loss for that position, equal to the margin requirement or your initial deposit.

Please make sure you understand all the risks before you get started.

We highly recommend you practice on our demo accounts before opening a live account. When you trade on the demo account the profit or loss is virtual but the prices are live so you will get a real sense of the risks involved in spread betting and CFDs.

CMC Markets’ trading platform offers three basic types of risk management orders. The first is the regular stop loss, which is a price level at which a position will be closed when price moves against you and reaches this level. We also offer trailing stop losses, which move in the same direction as favourable price movements to lock in profits. The third risk management order type is the take profit order.

We also offer a feature called transaction based stop losses, which is automatically enabled in all new accounts, although it can be disabled in your Preferences. This feature automatically sets a stop loss for every trade you place without you having to do anything. Click here to read more about transaction based stop losses.

Stop loss, trailing stop loss and take profit orders

Stop loss

Stop losses are used to close out positions at predetermined prices to help limit losses. They allow you to specify a maximum amount that you are willing to lose if the market moves against you. Your position will be closed automatically when the product price reaches your stop loss. CMC Markets’ trading platforms will automatically suggest a stop loss on every trade, equal to the amount that you have invested in the position. This stop loss can be altered during or after confirming the trade. It can even be removed completely, the choice is yours.

Note: Automatic transaction based stop losses can be turned off in ‘Preferences’ if you would rather not have the system set you a default stop loss on each trade.

Why are stop losses not guaranteed?

When the relevant price of the instrument reaches or crosses the ‘target price’, the order is executed at the first available price. However, due to market conditions such as trade volume and gapping, the first available execution price may or may not be exactly the same as your specified ‘target price’, this is why your target price cannot be guaranteed.

Trailing stop loss
These are used to lock in any profitable movement. As the market moves in your favour, the stop loss price of the order will stay the same number of ‘points’ away from the most favourable price to you. When the market falls, the stop loss order will remain at that new, more favourable price.

Note: When you edit a trailing stop loss, you specify a number of ‘points’ away from the current market price.

Take profit order
Take profit orders are used to close out a position at a predetermined profit level. This profit taking level can be altered at any time while the trade is live, whether via the charts or through the accounts section.

Handy hint: Use the charts that have been built into the order ticket to set your stop losses and orders against current and historical prices. Simply move the market price (blue), stop loss (red) or take profit (green) bars up or down and see the new price reflected in the order ticket.


Are my orders linked together?
If you place a stop loss and take profit order on one transaction they will automatically act like an OCO (one cancels other). When one order gets executed the other automatically gets cancelled. Similarly, if you place a limit order and then set take profit and stop loss orders alongside this trade, they will act as if-done orders, meaning these will only become active if the limit order is executed first.