Here's How To Avoid Disaster When Things Go Bust...

When you trade in shares, there will always be an element of risk involved. Best then to ensure that you limit that risk – especially when you’re new to trading.

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A few months back, I wrote about trading and how hard 2019 has been for many traders. Since then, a number of readers contacted me about their own experiences, of which pretty much all resulted in losing money so far this year.

I was fortunate that when I started trading in the mid-90s, all there was to trade was equities. Then, in late 1997, options (via listed warrants) were introduced. While options provided gearing, your downside was still capped at 100% because an option is the right to buy or sell, not the obligation. So, if things went horribly wrong, you could walk away from the option with no further obligation.

Now sure, a 100% loss in a trade is bad.

But the readers I refer to above are all traders who lost way more than 100%. This is because futures or contracts for difference (CFDs) are an obligation. This means you can lose a lot more than you started with.