CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Risk management definition

Risk management is the process of identifying potential risks in your investment portfolio, and taking steps to mitigate accordingly.

Risk in investment is the possibility that an open position will fail to deliver the outcome you intended: this can result in limited returns, or losses larger than your initial outlay. For this reason, traders often take steps to analyse the inherent risks in their trades, and find ways of lessening their risk.

Ways of lowering risk

Once you have identified the potential risks in your portfolio, there are many different methods of lowering risk. Some of the more common examples include:

Attaching stops and limits to automatically close out trades at specified levels
Hedging, or opening an inverse position to one that you already hold
Choosing trades that carry less risk
Diversification, or spreading your trades into a broad range of asset classes

Visit our risk management section

For more information on lessening your risk potential, take a look at our risk management section.

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IG is a trading name of IG Markets Ltd and IG Markets South Africa Limited. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in order to utilise their foreign investment allowance should the South African resident wish to open an offshore account with IG Markets Limited.

IG provides execution only services and enters into principal to principal transactions with its clients on IG’s prices. Such trades are not on exchange. IG Markets South Africa Limited is an authorised financial services provider (FSP No 41393). Whilst IG Markets South Africa Limited is a regulated FSP, CFDs issued by IG are not regulated by the FAIS Act as they are undertaken on a principal-to-principal basis.

IG Markets South Africa Limited is an authorised over-the-counter derivative provider and is regulated by the Financial Sector Conduct Authority.

The information on this site is not directed at residents of the United States or Belgium or any particular country outside South Africa 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.

Voted SA’s top CFD provider in Business Day Investors Monthly Annual Stockbroker Awards in 2012, best platform for Active Day Traders in 2013 and 2014, SA's best Online Broker in 2015 and 2017 and SA's best CFD provider in 2020 as well as SA's Top CFD Broker in 2021.

Risk management definition

Ways of lowering risk

Visit our risk management section

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