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Trading Knock-Outs on IG

As the great investor George Soros said about leverage, “It is much easier to put existing resources to better use, than to develop resources where they do not exist.” They carry great weight coming from the man known also as the, ‘Man Who Broke The Bank Of England’ because he speaks from a wealth of experience. And he is right on the money. 

To carry that statement further, one can put existing resources to ‘better use’ by buying CFD, particularly Knock-Outs. Knock-Outs can be traded on IG and is a CFD product. To understand why Traders should consider trading Knock-Outs, it is important to understand a few concepts, starting with leverage.

What Is Leverage?

 A trader who can harness the power of leverage, will be able to take on bigger positions with a smaller capital outlay.  I’ll give an example to put it in simpler layman terms, if a Trader puts in $100, through the power of leverage, he is able to trade with a bigger financial ability such as $150, $200 or even higher (depending on the leverage provided). That is what leveraging can do for you. And leveraging in the world of trading, is done through different types of financial products, one of them is called CFDs or Contracts For Difference. 

What Are CFDs?

To explain how CFDs works, it is simpler to compare it to buying traditional stocks.

When buying a CFD, you put up a fraction of the total value. It’s also called the leverage ratio. So now you know how CFDs work, it’s also important to know the next term which is called the Margin.

What Are Margins?

This is the term you will hear a lot when trading CFD. There are 2 types of Margin. The initial Margin and the Maintenance Margin. They are basically your deposits. The initial Margin is the amount required to open a position or start a trade, while the Maintenance Margin is the amount required to maintain an open position. In the event that the market moves against your position and you do not wish to close the position, you need to make sure that the maintenance margin is sufficient. Another important concept to note is exposure.

Now that you understand the basics, lets dive into the star topic. Knock-outs.

What are Knock-Outs?

 Knockouts is a CFD product that is offered on IG trading platform. Their vast benefits will allow you to consider choosing to trade them as you seek to gain exposure with the same, if not more, leveraging power.

Why get Knock-Outs?

As you already know, the idea of leverage. Knock-outs allow you to do just that. But even more, it allows you to manage your risks.

And its very simple to use.

So what are their benefits?

  • It is a limited risk position
  • You can trade Knock-outs anytime with the 24 hour markets (Except weekends)
  • It has a simple price structure where the Knockout price moves similar with the underlying price.
  • It gives you more control over your trade.

How does Knock-Outs help you to manage risks?

With leverage, there are also risks. To manage that risks, you need to make informed decisions.

With Knock-Outs, you can buy bull or bear knockouts depending on whether you think the market is rising or falling. This will allow you to take advantage of the current market trends. But you can also set the knock-out level upfront to prevent further losses when the market goes against you because the trade will automatically close at the selected Knockout point. Hence, upfront, you know how much you will be risking, and you can manage your risk better.

Also, in the event of a market flash crashes, since you have already selected the point at which the trade closes, it will minimize your losses and prevent market slippages compared to a normal stop-loss order. (A market flash crash is when the price of a position drops suddenly and steeply which can happen at any point of time.)

Now that you know more about CFDs and Knock-Outs, start trading Knock-Outs now on the IG platform to give it a try.

(Please note that every trade/investments comes with risk)

“Risks comes from not knowing what you’re doing.”

— Legendary Investor Warren Buffet