How can I manage my risks in CFD trading?

[Carlyn]

Hello, I have engaged in CFD trading recently, and I'm finding it quite difficult to adapt. I was hoping to make large sums of profit from CFD trading, but all is not well. I have exposed myself to risks and lost a large sum of money. I want to revive myself. Help me know how I can manage my risks in CFD trading.

[Faraz]

Hello Carlyn, 
CFDs being leveraged products, its risks are usually greater. And like any other financial product, it has its own risks. For example, if the market does not favor you, then you will make a loss.
For you to prosper well in such a market, then you need to come up with strategies on how you will manage your risk. Those who do not formulate such plans will find it hard to maintain profits in their accounts.
One risk management plan you can incorporate is a stop-loss order that permits you to select the amount in terms of points that are required and which you are ready to risk during your trade. Such will fight off whichever loss that you will suffer over your set price point.
You also need to evolve a trading plan and hang in with it. A trading plan will help you know what you want to achieve by the end of that trading.
If you are just a beginner in such markets that involve leveraged products, then you should trade in small sizes. By this, you will be building your understanding and skills in such markets.
Also, know the markets you desire to exploit. Make sure you recognize the factors that affect the various markets so you can foot your strategies in the one that suits you best.
How you manage your risks should depend on what your financial goals are, your nature, and how brave you are in such markets. Always map out what risk you are willing to take prior to commencing any trade.

[Leah]

Great question, Carlyn.
Being a leveraged instrument, CFDs invite profit and loss in equal measure. However, a trader’s success lies in their ability to manage risks effectively. 
The first measure is setting stop-loss orders, so the system ends the trade at your chosen level. What’s more, avoid using all your free equity as margin. This ensures the account remainder is enough to cover losses while you hold a position. CFDs can also serve as a hedging tool when a temporary risk faces your long-term investments. 
Moreover, identify the risk/reward ratio before trading. Suppose each winning trade gives you $2, and each losing trade subtracts $1, the risk/reward ratio becomes 2:1. 
Not forgetting the relevant technical indicators for catching trends. For instance, the signal prompts you to make a purchase when a short moving average goes over a longer moving average. 
Most importantly, adhere to your trading strategy. Remember, investors have different tolerance capabilities, hence, unique risk management tools.