CFDs are a high risk investment instrument and inexperience can lead to losses far greater than the deposits used to open trades.
It is for this reason that the use of CFDs within SIPP’s and SSAS’s needs to be carefully considered before inclusion within your pension.
Basic risk strategies need to be in place alongside the consideration of assistance and advice of a professional advisor to protect against the account going into a margin call (margin calls are a requirement for extra funds to be put into a CFD account to keep a CFD position open).
To manage CFDs successfully within a SIPP or SSAS appropriate risk controls need to be in place.
The main controls which need to be borne in mind are:
- Limiting the individual contract size
- Limiting the whole account
- Automatic stop-losses should be set on each trade
- Target triggers should also be set on each trade.
The discipline of having automatic stop-losses and targets set on each trade limits the risk of any individual trade going beyond the parameters of your account.
Please be aware that Contract For Differences or CFDs are classed as financial derivatives and as such carry a significantly greater risk than normal equities. Please see our CFD Risk Warning Notice under Risks & Legal.
