How to Set Up Your CFD Portfolio

April 9, 2021
by Leon Marshall,

Article Recap

CFD portfolios help traders manage their risk and retain close control over their open positions.

When it comes to CFD trading, one of the most popular ways to use a CFD account is as a trading portfolio.

This allows traders to create a CFD portfolio where they can actively manage their risk and retain close control over their open positions. It also enables traders to trade on margin, allowing them to open larger positions. This is especially true when compared to trading actual shares through avenues like a traditional broker.

In this blog, we’ll look at how to set up your CFD portfolio, some of the advantages of doing so and how traders can intelligently manage their risk when trading CFDs online.

What is a CFD portfolio?

Like any financial portfolio, a CFD portfolio is a collection of open positions on a range of financial instruments. It allows traders to spread their risk exposure.

You can choose to build a portfolio with only Shares or can create a broader portfolio incorporating a wider range of asset classes and financial instruments, like FX, Commodities and Indices.

The beauty of creating a CFD portfolio is that you have flexibility and choice in creating a portfolio that you believe offers the best possible chance of returns. Every investor will have their own unique appetite for CFD risk. When setting up a portfolio, understanding the level of risk you’re comfortable with and knowing which risk management tools are available to you is crucial to trading successfully in the long term.

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When setting up your CFD portfolio, there are a few key rules to help ensure you give yourself the best possible chance of success.

Follow our key tips for how to set up your CFD portfolio:

Think about what a well-diversified portfolio means

There are a huge range of different combinations and selections of assets you can choose to include in your CFD portfolio. The most important thing to bear in mind is that a diversified CFD portfolio could help minimise your risk exposure. If one part, or an individual stock, within your portfolio is underperforming then it could be balanced out by other stocks or assets which are overperforming. Think about what a well-diversified portfolio might mean for your trading strategy and how it could help you better manage risk.

Understand your risk appetite

Knowing how much risk you’re willing to take is important in building a strong trading plan. Some traders are ultra-aggressive with a portfolio of high risk investments that offer immediate potential reward. Others prefer to take relatively safe longer term positions. Make sure your investment goals are clear and that you know your limits and risk tolerance.

Choose assets that you understand and feel comfortable trading

This is crucial when it comes to building your CFD portfolio. The more you understand the market, the better you can become at anticipating moves, pre-empting spikes in volatility and identifying key trading opportunities as they arise.

Follow news, events and data releases around your portfolio

Once you’ve set up your CFD portfolio and feel comfortable that it meets your desired level of risk tolerance while offering the potential for consistent returns, you’ll need to actively manage the positions. This means being aware of news, events, data releases and broader economic factors which could impact the price of instruments within your portfolio. This is particularly important during periods of increased volatility, where you may need to alter the weight of your portfolio by making adjustments to the size of individual positions.

Building your CFD portfolio

Whether you decide to build a Forex-only portfolio or choose to build your portfolio with a range of assets, like Shares, Indices or Commodities, you can learn more in our Trading Education Hub. Get market updates across a broad range of asset classes and stay up to date with market moving events by signing up to our regular newsletter.

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Trading on margin is high risk.

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