CFD trading can be very risky due to CFD leverage, but a CFD stop loss is an easy way to limit the risk of heavy losses. You should always use a stop loss when trading – here are a few key points to be aware of.
What is a CFD Stop Loss?
When you place a CFD stop loss order, it tells your broker to automatically exit the position when the market price drops to a certain point. They are extremely useful for part time traders who are not always in front of real time charts.
Guaranteed Stop Loss Orders
Regular CFD stop loss orders are not fool proof. If there is a big news event, a merger, or something else that causes a big jump or drop in price, the market might skip over the order price between trading days and the CFD stop loss would not be placed. In these situations, a guaranteed stop loss would protect you. Even if an event causes the price to drop way below the price set to trigger the stop loss, the guaranteed stop loss lets you still sell at that price. Keep in mind, though, that guaranteed stop loss orders usually cost a premium.
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The use of CFD stop loss orders can really help your overall CFD strategy. When used correctly, it is a great way to cut losses short while letting the winners run.
