6 Ways to Mitigate Risks with Trading CFDs amidst Health Crisis2 min read
It was March last year when the World Health Organization (WHO) declared that the issue on COVID 19 crisis is already a pandemic. Along with the declaration, several business establishments were closed due to the lockdown that were imposed in severely affected areas such as Europe, US and Asia. Because of the government imposed health protocols that are designed to protect people from the pandemic, even Firewalls and Virtual Private Network (VPN) became tighter because more and more people have resorted to online transactions rather than face to face. In the case of trading CFDs, brokerages, trading platforms and financial coaches have noticed the sudden surge of account sign up these days. This may seem good news for online trading related companies but in the case of traders especially the newbies, the erratic market movements and increased volatility may shock them. In order to cope up with the shocking market behavior of financial instruments, here are 6 Risks Management Tips that can be applied to our current market situation.
1.Execute Limit Orders
The use of this risk mitigating feature is beneficial especially during high volatility. Moreover it also helps a trader who is working on portfolio diversification by means of executing multiple trades at the same time.
- Pair Back and Trade Safely
When we say trade safely, we mean trading with balanced risk. A balanced risk is getting into a trade that can hedge each other.
- Liquidate Positions before the end of a Trading Session
With this tip, a trader is able to evaluate his daily trading performance and plan for a better strategy on the following trades.
- Keep Track on News
Trading with the help of news especially on the effect of the Covid 19 health crisis will enable a trader to be updated so as to easily predict the possible movement of various trading merchandise in the market.
- Adjust your Leverage
When a trader is involved in leveraged merchandise such as Trading CFDs,it is very important to adjust one’s leverage because we all know that leverage has the ability to either make or break a specific account.
- Utilize a trailing stop feature
The stop loss order is typically used to lessen the risk of volatility and margin calls but this may also bring threat to your account when handled the wrong way especially when the position is not properly accounted for. Experts therefore suggest that traders should keep track and modify the utilization of stop loss features based on a daily assessment of trading performance.
Trading in a moment where the whole world is faced with the threat of a terrible health crisis is a great challenge. Several companies find it hard to cope up with the changes that are happening and this makes market behaviour become so unpredictable. With these circumstances being considered, it is a must for CFD traders to make sure that they make necessary adjustments in terms of risk tolerance in order to maintain a healthy trading experience.