Risk management

The CMC Tracker platform helps you manage the inherent risks of trading more efficiently with our advanced risk-management tools.

Understanding the risks

Successful investing requires an effective risk-management strategy. Investing in CFDs carries significant risks, and it is possible to make both substantial losses as well as substantial profits. The CMC Tracker platform is equipped with advanced tools to help you manage these risks and potentially minimise losses. You can minimise losses caused by prices moving against you by setting stop losses on your transactions. By doing this you will know up front exactly how much you are willing to lose and how much you aim to make from each transaction. Please note that your specified target price may not be guaranteed due to market conditions.

Stop loss orders can help you manage your risk but they won’t eliminate risk entirely.

When you invest in CFDs, you’re trading on the real-time movement of a financial market. The markets can move quickly throughout the day, so the value of your account can also change quickly.

To profit from trading with CFDs you have to get the market direction right. This goes without saying, but it is equally important that you understand how to manage your risk.

You can lose more than your initial deposit. The amount of any loss for an individual position may exceed the amount of margin that you used to enter into that position. This is a feature of leveraged instruments. Even if you’ve taken advantage of our customisable leverage, you face the same risks.

Remember:
It is impossible to eliminate risk entirely, but you can use stop loss orders to manage those risks.

Read our CMC Tracker Product Disclosure Statement (PDS) and make sure you understand all the risks before you get started.

We highly recommend you practise on the demo account before opening a live account. When you trade on the demo account the profit or loss may be virtual, but the prices are live. This will help you understand the risks involved in trading CFDs.

The CMC Tracker platform offers three basic types of risk-management orders:

• The first is the regular stop loss, which is a price level at which a position will be closed when price moves against you and reaches this level.

• We also offer trailing stop losses, which move in the same direction as favourable price movements to lock in profits.

• The third risk-management order type is the take profit order.

We also offer a feature called transaction-based stop losses, which is automatically enabled in all new accounts – although it can be disabled in your Preferences. This feature automatically sets a stop loss for every trade you place without you having to do anything.

Click here to read more about transaction based stop losses.

Stop loss, trailing stop loss and take profit orders

Stop loss orders

Stop losses are used to close out positions at predetermined prices to help limit losses. They allow you to specify a maximum amount that you are willing to lose if the market moves against you. Your position will be closed automatically when the product price reaches your stop loss. The CMC Tracker platform will automatically suggest a stop loss on every trade, equal to the amount that you have invested in the position. This stop loss can be altered during or after confirming the trade.

Note: Automatic transaction-based stop losses can be turned off in Preferences if you would rather not have the system set you a default stop loss on each trade.

Why are stop losses not guaranteed?
When the relevant price of the instrument reaches or crosses the ‘target price’, the order is executed at the first available price. However, due to market conditions such as trade volume and gapping, the first available execution price may or may not be exactly the same as your specified ‘target price’, this is why your target price cannot be guaranteed.

Trailing stop loss orders

These are used to lock in any profitable movement. As the market moves in your favour, the stop loss price of the order will stay the same number of ‘points’ away from the most favourable price to you. When the market falls, the stop loss order will remain at that new, more favourable price.

Note: When you edit a trailing stop loss, you specify a number of ‘points’ away from the current market price.

Take profit orders

Take profit orders are used to close out a position at a predetermined profit level. This profit-taking level can be altered at any time while the trade is live, whether via the charts or through the accounts section

Handy hint: : Use the charts that have been built into the order ticket to set your stop losses and orders against current and historical prices. Simply move the market price (blue), stop loss (red) or take profit (green) bars up or down and see the new price reflected in the order ticket.

Are my orders linked together?

If you place a stop loss and take profit order on one transaction they will automatically act like an OCO (one cancels other). When one order gets executed, the other automatically gets cancelled. Similarly, if you place a limit order and then set take profit and stop loss orders alongside this trade, they will act as if done orders, meaning these will only become active if the limit order is executed first.