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I am looking into trading and created a demo account for this trading website just to mess around a little and try to get some understanding of how it all works. I made an order to open at a set price. It did open, but then the price dropped drastically (before I closed the order). Being new to trading (I have done a little with cryptocurrencies on hitbtc) I was just wondering, because the price dropped I have a loss of £500+. But what I want to know is: because I never closed the order, is it possible if I wait until the price rises again to higher than the opening price I set; will I still make a loss? E.G. It currently says I have a loss of £500+, will that affect my investment if I just hold the order until the price rises enough so the loss would turn into a profit. I am just wondering because as I haven't closed the order (completed it) have I really made a loss yet or is it just a loss that I would have if the order was closed now?

  • The fundamental issue is that there is no 'price'. There's just no such thing. You own some "item", X. You may (or may not!) be able to sell it in the future. Note for example that when you say "the price dropped drastically", it could be there was just 1x only trade at that new low figure (I'm assuming you're trading some very thing instrument). – Fattie Oct 28 '18 at 3:53
  • @Fattie I was trying out silver on the demo account. I’m still new to this and am learning about the different numbers and stuff. The price (or points which may be the term?) was at around 14.73 then dropped to 14:80 or something. I wasn’t sure if the correct terminology for it – MCC Oct 28 '18 at 8:33
  • Say you live in a house you own, perhaps you do. It has no "price". There's just no such concept. You might be able to sell it, you might not. When you do sell it, it may or may not sell for what you want or for what someone wants to pay. There may be a sudden rush and the price will be surprisingly high, or there may sit there for two years and not sell. it has no "price". "price" only means the previous price it sold for. that's what I was trying to explain! – Fattie Oct 28 '18 at 13:42
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If you haven't closed the order yet there is no guarantee that the price will recover and go back up before your account is wiped out, especially since you are trading CFDs which are traded on margin. So technically you could lose even more than is in your account, although most CFD brokers would give you a margin call and close your order out when you run out of available margin.

Also, as you are trading CFDs on margin you will be charged interest for any open position you hold overnight.

If you want to learn to trade CFDs you will need to learn to have an exit strategy at the time you first enter the trade. This means that every time you enter a trade you should know at what price you will exit the trade if the price goes against you. The best way to do this is to enter a stop loss order or trailing stop loss order at the same time you enter the open order.

And you should have a written trading plan which has all your entry and exit rules and your risk management. You should test this plan before trading it with real money, and you should follow all the rules in your plan on every trade instead of trying to trade on gut feel.

  • Yeah, I know about stop losses now which would’ve automatically closed the order rather than let it run. I am still just messing around trying to understand more. I will also try to look into making a trading plan, try and find some information about how to create one. Many thanks – MCC Oct 28 '18 at 8:31

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