Quick Tips For CFDs
Trading CFDs is an excellent way of making money because they thrive in almost all market conditions. For you to develop a stable trading ground, you need to have and implement the right ideas and strategies. Here are 7 quick tips for CFDs to help you build a rising and steady equity curve.
Establish a trading plan
All kinds of trading require discipline to eliminate temptations and emotional reactions. Plan your entry strategy, risk management, money control, exit strategy and stick to them. Try to avoid selling or buying early and always wait for the market prices to reach the level you are comfortable trading at. Plan ahead of time the amount of money you want to place on each trade, and how much capital to put in every trade. Also, don’t make changes to your plans during a session not unless they will serve as a last resort.
Keep a CFD trading journal
A CFD trading journal helps you record all the trades that you make, wins as well as losses. It keeps you informed about the reasons you entered or exited a particular trade. Most importantly, you can always deduce your performance patterns so that you reflect on your thoughts and strategies.
Your journal should include the following items:
- Trading period
- Reasons for trading
- What you sold/bought
- Profits or losses
- A chart showing entry, profit target and stop
Create realistic trading goals
The first rule of preserving precious capital through CFDs is to ensure that your account is alive and running for the first year. For your survival, therefore, you must establish realistic goals that are clearly defined. Your first step can be identifying what you want which is the same as having a reason to trade. Then, focus on it by doing whatever you can on a daily basis to help you achieve your goals. Remember to keep at bay all distractions that might sway you away from your objectives.
Make use of CFD stops where necessary
If you ever find yourself on a losing line, exit the markets for a while so that you cut the losses quickly. Never also make the mistake of moving your stop loss further away, hoping that things will turn around. Trading CFDs is usually demanding and tempting meaning that getting emotional is very easy. For every trade that you enter, it will have a CFD stop assigned to it that you should consider using if need be. And as mentioned earlier, you should identify a CFD stop strategy outside live trading.
Keep up with market trends and news
Various events have the potential of causing major effects on trading markets and often take traders by surprise. To avoid that, you need to stay up-to-the-minute with geopolitical and global financial events. Note that not all news releases affect markets, but being aware of the current events can protect you from making obvious errors thereby helping you cut down possible losses. If you sign up for a reputable trading site such as CMC Markets, you get the opportunity of receiving free news on the events that are anticipated or are currently moving the financial markets on a regular basis.
Only trade when you have a positive mindset
To succeed in CFDs, you must be prepared to lose. No particular trader that has a 100 percent winning strategy because everyone is bound to fail at some point. In most cases, incurring losses bring about the feelings of anger, anxiety or fear. Volatile markets, on the other hand, bring along a sense of doubt. If you trade while having these emotions, you might end up making unnecessary mistakes and hasty decisions in a bid to recoup losses. For these reasons, always ponder trading when you are in the right mindset and take short breaks if you are not.
Stick to instruments and markets that you are experienced in
Although CFD trading offers you a good number of instruments to trade in, you must stick to those that you are used to. Once you gain more knowledge and self-confidence, you can venture into more sophisticated ones such as forex or indices. Also, don’t trade too many markets because your interests would be spread too thinly. Choose several sectors, get every information you need and invest in them.
CFC trading is an ideal avenue to pursue if you are well informed about its ins and outs. Following the above seven tips will help you become a more successful CFD trader.