1% Rule
This guideline suggests that a trader should never risk more than 1% (or sometimes 2%, depending on account size and trading frequency) of their total trading capital on any single trade.
Concentration Risk
Concentration risk means that an index CFD might be heavily exposed to the fortunes of a few dominant companies.
Counterparty Risk
Counterparty risk is the risk related to a broker’s ability to fulfill their obligations, especially in over-the-counter (OTC) products like CFDs.
Drawdown
Drawdown is the reduction in capital after a series of losing trades.
Equity In The Investment
Equity in the investment is the current market value of your securities minus the amount you have borrowed from the broker.
Excessive Leverage
Excessive leverage in CFD trading can amplify greed-driven risk-taking, magnifying both potential gains and losses.
Exchange Rate Risk
Exchange rate risk is the most substantial risk where if the high-interest-rate currency depreciates against the low-interest-rate currency, the capital loss from the exchange rate movement can easily outweigh the interest earned.
Gap Risk
Gap risk refers to the possibility of an asset’s price “gapping” beyond a pre-set stop-loss order, leading to a larger-than-intended loss.
Guaranteed Stop-Loss
These ensure your position closes at your exact specified price, regardless of market conditions.
Hedging
Hedging is a risk management technique where you make a trade to offset potential adverse price movements in another asset.