CFD trading has become widely popular during the last 10 years and many brokers started offering quite an easy access to the markets. All you need is some $100 and proper ID documents to open a real account and placing trades. Of course, you can increase your revenue but there is a risk of losing your initial investment because the markets are highly volatile. The use of leverage initially increases the risk as well as the opportunities of making money. The leverage factor allows you to multiply your profits by 100 times of what you have initially invested in your account.
The first step is of course to get familiar with the concept of cfd trading and then open an account with a reputed forex and cfd broker. I often recommend this CFD trading broker because it gives access to more than 1000 instruments from a single web-based platform which is easy to use and offer 30 days demo trading – absolutely risk free. Here are some basic advices for cfd trading.
1. Don’t keep looking for the holy grail of trading – the perfect trading strategy that will always work. There is no such thing as ever working trading model because the markets change every day – and that is what is exciting about the markets. They are never the same even within a single day.
2. Allow the opened trades to gain enough. Most of the traders do not allow their trades to stay open enough time so the profit can be maximized. There is no place to fear or be greedy. Just make your initial plan working and exit the trade at the specified limit.
3. Cut the losses – With the same respect (even more) you should look your losses. Most of the traders do not put stop losses which is gambling and not trading. Once put follow your stop and never move it deeper. I have seen traders literally ruining their accounts because of a single trade.
4. Trading method – you should choose what trading method is the most suitable for you – either scalping or long term trading, it should suits your condition and psychology as a person. Follow your trading method because that is how you will become perfect.
5. Look and choose your entry points – Trading is much more looking at the charts for the best moment than making deals all the times. Usually, you will look at the screen 90% of the time and the rest will be for making the trades. Once identified, reasons for being in a trade must not be changed. Entering the market in the right time is as essential as to exit at the right time.
6. Trade the exit too – You cannot always identify with 100% certainty when to exit but still you can stay with your strategy before entered the market. Make it clear at what conditions you will exit the market and if possible set it in the electronic trading platform and don’t change it.
7. Keep a trading diary – each trade shall teach you more and more. Some winning trades will show you how to keep an eye on the winning side without getting too greedy. The losing trades are the best teacher. When you have 3 losing trades in a row try to stay out of the market for a while and to evaluate the situation.
Those were just some basic advices on cfd trading. Before opening an account make it clear – which market will you trade. For example, one of the best conditions for trading CFD on shares will make it easy for you to maximize your profit. Having low commissions and trading costs directly increases the chance to win.
Guest post by Peter Traychev.