Limited Liability in Shield CFD Account

CFD providers offer different types of accounts to their clients to suit individual needs. One of the more popular accounts is a limited liability account, which is often known as a Shield CFD Account.

A Shield CFD Account is a limited liability account, which means that the account holder cannot lose more than the total equity in his/her account. Total equity in this context is the account balance plus any benefits and/or interest accruing on the account and less any charges, adjustments and fees that may be payable in respect of a CFD.

To ensure that the account holder does not lose more than what is in the Shield CFD Account, the product provider places one or more liquidation orders that are executed the moment the total equity is equal or less than the liquidation level.

Limited liability CFD accounts often have provisions for placing relevant stop loss orders for closing or reducing existing position/s created in the account but guaranteed stop loss orders are not allowed. Still, a Shield CFD account stop loss order is more or less like a guaranteed stop loss order inasmuch as that it is executed at the agreed price. But in the event of gapping due to sharp movement in the price of the underlying reference instrument and the CFD price gaps through the stop loss level, a limited liability CFD account stop loss order is executed at the agreed price regardless of the next available CFD price. However, such stop losses can be placed at a minimum distance constraint set by the product provider.

Regardless of the fact whether a Shield CFD Account stop loss order is placed or not, the underlying condition of limited liability under which the account was initially opened still applies to the account.