Risks of trading Countdowns

If you’re new to trading Countdowns, it’s important to understand the risks associated with them before you start trading with a live account. 

For more information on how to trade Countdowns, visit our Countdowns overview page.

Market risk

Like other forms of trading, Countdowns can involve overall market risk. Markets can move up or down in relatively short timeframes. Even with the use of analysis and research, it’s not always possible to accurately predict the direction markets will move. As your profit or loss when trading Countdowns depends on you accurately predicting whether the settlement price of a product will be above or below the Countdown price at the end of a short-term timeframe, there is the possibility that the markets could unexpectedly change direction within this time.

Short-term expiries

Countdowns are traded over very short timeframes. These range from 30 seconds to one hour depending on the instrument. While for some this can be an exciting and more straightforward way to trade the markets, it is not suitable for everyone. For traders looking to hold longer-term positions, they should consider an alternative form of trading.

You can lose all of your investment

When trading Countdowns, there are only three possible outcomes (win, lose and occasionally, draw) and the amount you can win or lose is predetermined. Your potential profit or loss is displayed on the order ticket before you enter your trade. This means you have the benefit of knowing in advance the fixed amount you could lose if the trade goes against you. However, it is important to remember you can still make substantial losses as well as gains. A string of substantial losses could lead to you losing all of your capital.

You can’t use a stop-loss

You can’t set a stop loss or take-profit order when trading Countdowns. However, as profits and losses are predetermined when trading Countdowns, it doesn’t matter how much above or below the original price the product's price is at expiry, the return and risk levels will be the same. There are other ways to manage your risks when trading Countdowns, rather than setting stop losses. For example, to help limit your losses, it’s prudent to only risk a small percentage of your overall capital on each trade. 

Fixed expiry times

Countdowns aren’t considered to be a ‘liquid’ type of trading. This is because with Countdowns you’re unable to exit the trade or alter the expiry once you have placed it. Your chosen timeframe will count down, and whether you win or lose will be determined using the product's price at the expiry time. While this has certain benefits, it also means traders must wait until the expiry time before they can take their profits or losses.

Investing in CMC Markets derivative products carries significant risks and is not suitable for all investors. You could lose more than your deposits. You do not own, or have any interest in, the underlying assets. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Spreads may widen dependent on liquidity and market volatility.

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