The Dangers of Christmas for Traders - Hedge Your Investments with CFDs

LONDON, December 19, 2011 /PRNewswire/ --

Every year traders take time off over the festive period to see friends and family, leaving their accounts unchecked and vulnerable to stock market falls, particularly during volatile times.

Thousands of accounts continue to run during this time and could to incur heavy losses if they are not managed appropriately.

In order to minimise risk, traders can hedge their portfolios to protect themselves from volatile market conditions and falls in share prices.

CFDs are often used as a hedging tool by investors to offset against potential losses made in their portfolios by short selling shares, allowing you to make profits each time a share price falls. And what's more, you can offset any losses made in a hedged trade against your Capital Gains Tax payments at the end of the year, making hedging through CFD's all the more advantageous. To find out more about this particular advantage, please seek independent tax advice.

Joshua Raymond, Chief Market Strategist at City Index said "If you have a long term portfolio you wish to keep, but feel that there is a short term risk to the value of your investments, you could use CFD trading to mitigate a short term loss by 'hedging' your position."

This means that if the value of a trader's portfolio falls, the profit in the CFDs would help to offset against these losses, enabling the trader to retain their portfolio without incurring any significant loss to its overall value.

For many traders Christmas typically sees lower market volumes, which means that when trades are made above normal market sizes, this can make the markets even more volatile. This is why it is important to use the right risk management tools and limit potential losses by using CFDs without capping the long term profit potential of your share portfolio.

Learn more about dealing in Contracts for Difference with free City Index online tutorials and seminars.
Visit http://www.cityindex.co.uk/cfd-trading/what-is-cfd-trading.aspx for details.

CFD trading is leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

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About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, spread betting.

We constantly look to widen the range of assets we offer, improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support. Visit http://www.cityindex.co.uk/ to learn more about online trading.

SOURCE City Index