Trading CFDs is a fine art and inexperience can lead to huge 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 considered with the intensity of a microscope before their inclusion into your pension.
Basic risk strategies need to be in place alongside the assistance and advice of a professional advisor to prevent any adverse market movements forcing the account 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 within a SIPP or SSAS you need to adhere to strict but basic risk controls.
The main controls which need to be borne in mind are:
- Limit the individual contract size
- Limit the account
- Automatic stop-losses should be set on each trade
- Target triggers should be set on each trade.
The discipline of having automatic stop-losses and targets set on each trade ensures that emotion is removed from trading therefore limiting the potential for any bad decisions.
