EuropeFX Video Tutorials
Need to know what a Stop Loss is? Are you confused about Stocks? Watch our video tutorials and get answers to these and many more.
What is a CFD
A CFD (Contract For Difference) is a type of derivative that allows for leveraged trading on a wide range of popular assets. Trading CFDs on stocks, for example, does not involve buying or selling the actual stock. Trading in CFDs is trading on the difference in the price of an asset between the opening price and the closing price of a contract for that particular asset.
What is an Index
An index is a method used to track the performance of a group of assets or market segments, with the majority of countries around the world having at least one financial index. For example, the S&P 500 (Standard and Poor 500) index tracks the 500 top companies' stock values in the United States.
What is a Stock
A stock (or share or equity) is a financial security representing ownership of a percentage of a company. Stock entitles the holder to a corresponding portion of the company's assets and trading profits.
A margin call occurs when the value of a trader's account falls below the broker's required margin amount. Forex and CFD trading are leveraged trades, that is to say with an amount "borrowed" from the broker in the form of margin. Say, for example, you trade at 1:10 margin and deposit $1,000 with your broker, you effectively have $10,000 of funds to trade with.
Placing a Stop-Loss Order
A stop-loss is a trade order opened on your trading platform that automatically buys or sells a particular asset once the asset reaches a pre-defined price. Stop-loss orders are used to safeguard your open positions by limiting potential losses on the trade according to your risk management profile.
Why Place Stop Losses
Stop-losses are essential for both risk management in case of losing trades and protecting profits on winning trades. Nobody can be online around the clock. Prices in the forex and CFD markets are subject to severe fluctuations on the back of any news or significant updates. Failure to properly employ stop-losses could see you suffering excessive loss in the case of losing trades or missing out on potential profits for winning trades.