In the event of a 10% fall in the price of the asset, you will lose 2,000 while you will have invested only 1,000. This mechanism therefore presents significant risks in the event of a market downturn and requires good knowledge of the workings of the stock market to be used. Here are tips to limit the risks. You can take the Plus500 Review in the page and work accordingly.
Don’t Look For Significant Leverage from the Start
When you start trading, you have to know how to be patient and not try to get amazing results from the first months. A race for short-term profitability can even hold some unpleasant surprises. It is therefore necessary to start favoring small amounts with moderate leverage. This will allow you to learn to master this tool, and then gradually increase the amounts if you wish and when you feel more comfortable. To protect yourself against the risks linked to leverage effects, it may also be advisable to define a monthly budget jointly with your financial advisor.
Avoid Overly Complex Platforms and Products and Have Them Accompany You
For a novice, the springs of leverage can be difficult to grasp. Going through some Forex platforms can be complicated, even dangerous if you do not master the inner workings. Also, turn away from certain families of derivatives that offer significant leverage such as CFDs, warrants and other turbo. In the case of CFDs (Contract for Difference), if the leverage effects can be very significant in the short term, they require daily attention since they are traded on platforms which do not even depend on Euronext. They are therefore reserved for experienced investors.
Finally, rather than chasing miracle returns promised by advertising spotted on the net, ask for advice and have someone accompany you rather than launching yourself.
Learn How to Quickly Use the Main Stock Market Orders
In order to advance step by step, you must seek to quickly master the Stop and Limit orders. These protect your capital while limiting your losses in the event of a market downturn. The limit order allows you to determine in advance with your financial advisor a gain level beyond which you want to block your position. Thus when the price reaches this level which generally corresponds to the resistance level, the broker will execute the order.
The stop order on the contrary allows you to limit your losses. Again, you first define a floor level generally corresponding to the support level. When the price reaches this level, the broker will block your positions, which will allow you to protect your capital against a sudden and abnormal fall in the price.
In addition, learning to control the leverage to take full advantage of it requires you to keep yourself constantly informed about stock market news as well as that of the companies and sectors in which you have invested. A tool that can prove useful but for an informed public who devotes a large part of his time to managing his assets.
Popularity of CFD
The online difference contract (CFD) is becoming an extremely popular way to speculate in the financial markets. This form of commerce started in 1990 and has gained international popularity over the past decade. Tips for trading CFDs online include knowing that it is possible to make money from falling market value. Traders should also avoid commodity markets, as they are the most expensive and volatile, and should also beware of leverage.