We urge traders to maintain vigilant for over-leveraging, in order to guard against the dangers of highly leveraged exposure to volatile, fluctuating markets which can be fatal to even experienced investors.

With low margin requirements an industry standard, CFD investing brings the constant allure of aggressively inflated returns, which can easily lead to over-leveraging and over-exposure to a particular market. And with markets continuing to experience volatile trading conditions, the risks of being too heavily exposed to a CFD position are significant.

The key to success with margin trading is moderation and caution, advocating a sensible, measured approach to investing that doesn’t trade too heavily or jeopardise the integrity of the trader’s capital.

Over-leveraging was one of the more common mistakes of inexperienced traders, and suggested that it was a potentially fatal trap for unsuspecting CFD traders who aren’t confident with handling risk.

The more leverage you apply, as a percentage of your trading account, to any one position, the more exposed you are to the risks of the market.  With uncertain political and economic conditions virtually across the world, the markets can be turbulent and particularly unforgiving of those traders that invest too heavily in margined products like CFDs. In order to succeed as a CFD trader, it requires a much more sophisticated approach to managing risk and generating a return on your trading capital.

We’re urging new traders to avoid the disaster of over-leveraging, instead trading in a way that preserves capital and builds at a steady, cautious pace.  While CFDs can deliver significantly amplified returns in a matter of minutes, slow and steady definitely wins the race, and helps dramatically reduce the risks your capital will be exposed to en route to delivering a healthy return.