How to Manage Risks

  • Managing risk is a fundamental part of any trading strategy.  

    City Index offers a range of risk management tools on our trading platform to help you limit losses without capping potential profit. A series of seminars developed are available exclusively to City Index clients (free of charge) to help build your CFD education. We strongly recommend taking advantage of all tools available, particularly in volatile markets.

    Orders

    Orders are flexible tools with which you can open or close trades. They are essentially instructions to trade. They can be valuable in minimising downside risk and can also be used to maximise your trading potential on any future price trends that you may foresee. City Index offers a range of orders to help you get into, and out of positions at the price you want.

    Limit Orders

    A limit order is an instruction to buy or sell at a price better than the current available price. Limit orders are used to lock in profits by closing a CFD trade once the market passes the trigger value you’ve set. This means that you are able to automatically close trades and cash in your gains if the market moves in the way you expect.

    Stop In Orders

    City Index clients can access a rarely offered limit order that allows you to place orders to buy above or sell below the market. The order is triggered when the stock moves through that pre-determined point - similar to a conditional order in share trading.

    Stop Orders

    A stop order is the opposite of a limit order: it is designed to limit losses on an open order by closing a losing trade at a worse price than the original purchase price. A stop order can also be used to open a trade at a lower price.

    Stop Loss Orders

    Stop losses are used to reduce risk and limit potential loss by closing a losing trade once a market passes a trigger value set by you. This means that you are able to automatically close trades and cut your losses if the market moves against you, helping you to limit your downside potential. Standard stop losses are not infallible though, because the order will close your trade at the best available price once the stop value has been triggered.

    During times of volatility, the market might gap, and your closing price (the best price available) could differ from the trigger value you have set.

    At City Index, we offer standard stop loss orders freely across all markets on your trading account. 
     

    Guaranteed Stop Loss Orders (GSLOs)

    Guaranteed Stop Loss Orders are the most efficient risk management tools available. They work in the same way as Standard Stop Loss Orders, except they guarantee to close your trade at the trigger value you have set, regardless of underlying market volatility and gapping. For this added insurance, Guaranteed Stop Loss Orders incur a small premium (debited from your cash balance), upon confirmation of the order, and minimum distances apply.

    Please note that GSLOs are not available on all markets. 

    One Cancels the Other Orders (OCOs)

    Limit loss and protect profits with OCOs. An OCO is essentially two orders linked to each other. When one order is activated, the other is automatically cancelled. This prevents the unused order from opening a new position.
      

    Hedging

    CFDs allow you to short sell and potentially profit from falling market prices. As such they’re often used as a ‘hedging’ tool by investors (as ‘insurance’) to offset losses in their physical portfolios. For example, if you have a long-term portfolio you wish to keep, but feel that there’s a short-term risk to its value, you can use CFDs to mitigate a short term loss by ‘hedging’ your position. This way, if the value of your portfolio does fall, the profit from your CFDs offsets the losses, allowing you to retain your portfolio without any significant loss to its overall value.
     

     

  • Open an Account

    Pie Chart
    Open a live CFD trading account.   

    Apply Now 

     
  • Any Questions?

    Help and Support
     
     

    Contact Us

    Phone 
     1800 354 182
    Email us 
    Login to Chat