Trading responsibly

Leverage and risk on this page

Trading contracts for difference carries a level of risk that many people underestimate. A CFD is a margined product: a modest deposit supports exposure to a much larger notional position. That gearing cuts both ways. Gains are magnified, and so are losses, which can mount quickly and may exceed the funds you deposited with the broker. In adverse conditions a shortfall can arise, so you could owe more than your opening stake.

Because of this, position sizing deserves more attention than any view about direction. Money set aside for essentials, for debt repayment or for near-term commitments does not belong in a margined account. Treat any capital committed as expendable.

Practical safeguards

• Decide in advance the largest loss you will accept on a position and on the account as a whole.
• Use stop orders and, where offered, negative balance protection.
• Keep a written record of entries, exits and the reasoning behind them.
• Step away after a losing run rather than trying to recover it in a single trade.

Nothing on this page promises a profit, and no outcome is assured. Shares of companies listed on the Johannesburg Stock Exchange are not CFDs; they are bought and sold as securities, and the gearing described here does not apply to them.

If the mechanics of a product are unclear, or you want independent guidance on your circumstances, the financial regulator's consumer service can point you to general information and support.