close

October 2022

Finance

How to reduce the risks associated with CFD trading in the UK

If you’re considering getting into CFD trading, you must know the risks involved. Although CFDs can offer some great opportunities for making money, they can also be risky. That’s why taking steps to reduce the risks associated with CFD trading before you start is essential.

What are the risks associated with CFD trading in the UK?

There are several risks associated with CFD trading in the UK. These include:

The risk of losing money

When you trade CFDs, you’re essentially betting on the price of an asset going up or down. If the price moves against you, you can lose money. And, because CFDs are leveraged products, you can lose more money than you invested, which is why it’s crucial to have a stop-loss in place to limit your losses.

The risk of not being able to leave a trade

When you trade CFDs, you enter into a contract with a broker, which means that if the price of the asset moves negatively against you and you want to get out of the trade, you may not be able to do so because your broker may not be willing to repurchase the CFD from you at the current price. Make sure you choose a reputable UK broker who will give you the option to exit a trade if necessary.

The risk of counterparty default

When you trade CFDs, you’re also exposed to counterparty default risk. This risk is where your broker fails to meet its obligations under the contract. For example, if they go bankrupt or refuse to honour a deal. While this is unlikely to happen with a regulated broker, it’s still something to be aware of.

The risk of market manipulation

Another risk associated with CFD trading is market manipulation, where people or groups attempt to artificially move the price of an asset in a particular direction. Traders can do this for various reasons, such as to make a profit or to cause havoc in the markets. While market manipulation does occur, it’s generally not a big problem in the UK.

The risk of political or economic instability

You’re also exposed to political and economic risks when you trade CFDs. For example, if there’s a change in the government or a country goes through a financial crisis. These events can significantly impact the markets and, as such, your ability to make money from trading CFDs.

Four tips on how to reduce the risks associated with CFD trading:

Here are four tips on how to reduce the risks associated with CFD trading:

Make sure you know what you’re doing

The above might seem like an obvious point, but it’s worth reiterating. Before trading CFDs, you must understand their work and their potential risks. If you don’t know what you’re doing, it’s easy to make mistakes that could cost you a lot of money.

Use a reputable broker

When it comes to CFD trading, not all brokers are created equal. Some brokers are much better than others when it comes to things like customer service, fees, and the overall trading experience. Always use a reputable broker from Capital Markets that you can trust, which will help to reduce the risks associated with CFD trading.

Don’t over leverage

One of the biggest mistakes new UK traders make is over-levering their positions. When you over-leverage, you’re essentially borrowing money to trade, which can amplify your losses if the trade goes against you.

Use stop-losses

A stop-loss is a trading order you can place with your broker to close your position automatically if it reaches a specific price. This order is a valuable tool for managing risk because it means you won’t lose more money than you’re comfortable with if the trade goes against you.

Conclusion

CFD trading is high-risk, but there are ways to minimise the risks. Make sure you understand what you’re doing, use a reputable broker, don’t over-leverage, and use stop-losses. If you do all these things, you’ll be in a much better position to trade safely and profitably.

read more
Finance

Choose the Tax Professional Wisely to Enjoy the Benefits of Expertise

Handling tax is not the thing for everyone. Especially people who have to deal with everything- from family to business or job, tax management can be a tough thing. Not only it requires one to keep all the details ready but also to maintain clarity at all the times. It is nothing too surprising to keep a detail aside to record later only to forget it completely. Many of such transactions are found to be missing from the record we try to keep. When the time comes, issues come along with it. Tax related issues does not take time to arise as IRS never fails to notice any discrepancies. Whether one owes tax back or gets audited by the IRS, professional guidance is necessary. Tax attorneys are the people who have spent years after tax and related factors. They have prepared themselves to deal with all tax related issues and have also gained themselves the right to represent before the IRS. Choosing the right attorney will bring you a stress-free dealing with tax issue and IRS.

Communication and Confidentiality

Tax related matters are not something that you would like to share with someone. No one would like their issues to come wide out into the day light. As the matters regarding the process could be quite complicated, the attorney must be someone who is willing to communicate clearly and properly. The tax relief professional must talk honestly about your current condition.

OIS and the role of the Tax professional

OIS or the Offer in Compromise is an agreement between the IRS and the taxpayer. It helps with settling the issue between the two parties. The tax professional takes charge of representing the taxpayer before the IRS and negotiate on his or her behalf.

read more