9

Understanding the nuts and bolts

Risks explained

Derivative products were developed to help investors manage investment market risks and they can also be used to increase performance. Before you start trading, it is extremely important that you understand the high level of risks CFDs carry for you as an investor. The potential for large gains must be balanced alongside prudent risk management. CFDs have the potential for generating significant losses over a very short period of time. You must therefore understand the risks relating to your account’s activity and have sufficient funds to cover any potential losses you may incur.

Financial markets fluctuate in value throughout the day. These price movements are determined by supply and demand, which is affected by a number of factors including the availability of market information and speculation. At times these movements can be exaggerated due to uncertainty within the markets which in turn creates a higher potential risk for CFDs.

To find out more

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