What are knock-outs and how to trade them
Knock-outs are limited-risk CFD trades that automatically close when the market reaches your chosen level, helping you manage risk while maintaining profit potential.
Key Takeaways
Fixed maximum loss determined upfront
Positions move one-for-one with underlying market
Single premium payment required
No ongoing margin requirements
Automatic closure at predetermined levels
What are knock-outs?
Knock-outs (sometimes called knock-out options) are the simplest way to trade with limited risk. These limited-risk CFD products work like having a safety net - if the market moves against you, your trade automatically closes to protect you from losing more than you planned.
Perfect for beginners
- Can't lose more than you invest
- No surprise costs or margin calls
- Easy to understand
- Great way to learn leveraged trading safely
How knock-outs work?
Choose your market - Pick any market like Apple shares or EUR/USD
Pick your direction - Up (bull) or down (bear)
Set your knock-out level - This is where your trade will automatically close
Pay your premium - One upfront cost covers everything
Bull knock-outs = you think prices will rise
Bear knock-outs = you think prices will fall
Simple real-life example (hypothetical)
Your observation:
Apple shares are $150 per share.
You believe:
That the share price will rise soon.
Your trade:
- You choose a bull knock-out
- Set your knock-out level at $145
- You invest $100
Possible outcomes:
- If Apple rises to $155 → You make a profit
- If Apple falls to $145 → Trade closes, you lose $100 (but no more)
Singapore market example
Imagine the Singapore Blue Chip index is at 3,200 points. You believe it will rise, so you buy a bull knock-out with a knock-out level at 3,150 and invest S$100. If the index rises to 3,250, you profit. If it falls to 3,150, your trade closes and you lose S$100 (but no more).
How to trade knock-outs with IG Singapore
Go to the ‘markets’ section and select ‘knock-outs’
Choose the market you want to trade
Decide if you want to go long (bull) or short (bear)
Set your knock-out level
Enter your position size
Check the knock-out premium
Click ‘place deal’ to open your trade
FAQs about knock-outs
How much money do I need to start trading knock-outs?
The minimum depends on the market and your chosen knock-out level. Always start small while learning.
Can I lose more than I invest in knock-outs?
No. The maximum you can lose is your upfront premium. Unlike regular trading where losses can exceed your deposit, knock-outs cap your risk.
Are knock-outs good for beginners?
Yes - they're actually designed for risk management. You know your maximum loss upfront and can't get margin calls, making them safer than traditional leveraged trading.
What's the difference between knock-outs and regular CFDs?
Knock-outs automatically close at your safety level and require one upfront payment. Regular CFDs can result in bigger losses and ongoing costs.
Do knock-outs expire?
Yes, but expiry dates are typically months or years away. You'll usually close your position manually for profit or loss before expiry.
How complicated are knock-outs to understand?
They're actually simpler than most leveraged products. Market moves $1, your position moves $1. Hit your safety line, trade closes. That's it.
Are knock-outs the same as knock-out options?
Yes, knock-outs are sometimes called knock-out options. They're limited-risk CFD products that automatically close at your chosen safety level, protecting you from losing more than your initial investment.
Try these next
Contact
New clients
+65 6390 5133
accountopening.sg@ig.com
Existing clients
+65 6390 5118
helpdesk.sg@ig.com
Lines open 24 hours
Monday - Friday
Start a WhatsApp chat
Connect with us
Disclaimers:
- All forms of investments carry risks, including the potential loss of all or part of your principal amount invested. The value of an investment product may rise or fall, and may also become valueless. Past performance is not indicative of future results. Please ensure that you fully understand, and are aware of, the risks and costs involved.
- Trading CFDs may not be suitable for everyone. CFDs are leveraged instruments and can result in losses that exceed deposits. Refer to the Risk Disclosure Statement and Risk Fact sheet.
- IG Asia Pte Ltd (Co. Reg. No. 200510021K)("IG") is regulated by the Monetary Authority of Singapore and holds a capital markets services licence.
- IG provides an execution-only service. The information in this advertisement does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of or solicitation for a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. You should consider your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
- The information on this site is not directed at residents of the United States or Belgium and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
- This advertisement has not been reviewed by the Monetary Authority of Singapore.
