What is CFD Trading?
Your may be new in the trading industry and wondering what CFD trading means.
Simply put, contracts for difference CFD Trading are the ability to speculate (buy or sell) on rising and falling financial products. You can trade CFD, Forex, Index and Commodities with CFD trading.
Through CFD brokers, it gives you the opportunity to access more than 10,000 trading instruments around the world.
The products you would normally trade in the stock market, you can also trade similar products with CFD trading, but only a small margin is required on the front. Your CFD provider allows you to trade margin using its trading platform to speculate on market movements for potential earnings.
Now that you understand a little bit more basic what CFD means, let’s go deeper in to the top seven CFD trading tips instead!
1. PPC (Preserve precious capital)
A fantasy money-management / capital-saving idea that comes from Marcel Links’s brilliant trading book “High Probability Trading”.
In the book, Marcel describes how in his early days when a trader saw his trade and suggested that he concentrate on the preservation of precious capital.
“Forget about making money; just try as hard as possible not to lose any. Every dollar you have is precious, and fight as hard as possible to keep it in your pocket and out of someone else’s.”
Your goal should always be to keep your losses as low as possible. What is the purpose of having the best CFD trading system in the world if you’ve lost all your money?
2. Get to know yourself! Your own borders: weaknesses and strengths
“If you look around the table and you can not see who the sucker is, it’s you!” a well-known quote from the poker table. Of course you need a positive trading system or the edge of the markets.
Keep in mind that in the trade they are the professionals’ goal of trying to make money from you. Be disciplined, diligent and confident on your part as well as market attitude. Working hard and improving your financial situation requires you to be focused.
Here is some examples of a trading edges: (Keep in mind that this list below is a starting point. Do not underestimate your own skills. One tip is to work hard to improve your strengths and minimize your weaknesses.)
– See your money management plan
– Permit to make your input technology perfect
– Your ability to be patient and wait for opportunities
– Avoid making too many mistakes and seeing a mistake before it happens
– Ability to trade the news and respond quickly to news events like non-payrolls
– Skills that can add winning positions and maximize profitable trading
3. Learn to control your CFD leverage effect
CFD lever is extremely powerful when things go well. Therefore, it will be so easy to only keep increasing positions as you win. But the most dangerous thing is to forget about the inevitable loss that always exists around the corner.
I bet that you probably have heard about a trader who managed to convert a small account into a mega account, only to return all profits.
Be alert when it comes to the emotional mountain and roller coaster or the marginal calls, you do not have to let this disturb you. Instead, be aware of the risks of each CFD position you take, it will give you a calm and some type of control.
You have to start small with your CFD leverage effect. Keep your overall exposure low relative to your capital base. When you start, shop from zero lever up to a maximum of three times your account size. Are you a trader dealing with exchange rates in the short term? Then keep your liver very small.
4. CFD Stop
Ending losses are meaningful as they help to minimize the loss. This helps you with CFD Tips number 1 – preserve valuable capital.
The trade you enter must have a clearly defined CFD stop assigned. Ideally, you should have identified your stops outside of live trade in prices that are moving. As I mentioned earlier in the text, it is easy to get emotionally involved, especially when you are in the falling market. It is also possible to believe that your stock will go in your direction miraculously.
Probably it does not and hope is nothing to rely on. Therefore, Define a CFD stop out of market hours and stick to it. Many loss trading examples are based on technical analysis to determine their sales prices. Fundamental analysis is not used as much with short-term traders’ stopping strategies.
5. Have clear realistic written down trading goals
“All I want to do is make a measly $1,200 a week trading with my $12,000. That’s achievable isn’t it?”
After your first rule, you will save valuable capital, since your first main goal of your CFD trading account is to keep your trading account intact and stay in the game for the first year. It is definitely survival that is most important if you are able to profit from your buying and selling of any financial instrument.
One sentence I remember from a mentor, Jim Rohn, used to say:
“If you don’t know where you are going, well you will get there”
The underlying budskap means where are you going to end up somewhere and is it really where you want to end up? Would not it be meaningful to try to plan a path towards a steady CFD trade career?
Below you will find a simple goal written idea that works:
– Identify where you want to come, what is your final goal?
– Focus on the goal daily and keep it in your mind
– Kill all distractions that move you away from your goal
– Carefully return to item two
6. CFD-trading journal and magazines
A CFD trading magazine allows you to register the shops you do just as you would with a diary entry in your life. Using a CFD trading magazine will make it possible for you to clarify why you entered or ended a trade. In addition, you can learn incredibly a lot of experiences that will be of great importance in your own business career.
The most important lesson often comes from the hindsight. When looking back at their thoughts and strategies, some patterns will appear – the good, the bad and the ugly. It is important to note these as well as to map a path to recovery.
Examples of some important things that should be noted in the CFD Trading Journal:
– What instrument did you deal with?
– The time trade began and ended
– Background to trade – Technical, basic, tip or dartboard?
– Led the trade to profit or loss
– Did you follow your trade rules? If No, it is considered as a mistake
– Rate your trade on a scale of 1-10
– What lessons do you take with you, exit and overall event management?
– Understand a chart showing the proposed entry, stop, and profit target. Always good to show your thoughts before doing trade. You know, the part where you analyzed the trade before the markets opened (less feelings).
7. Are you a discretionary trader or a mechanical system supervisor?
In either case, you still need to create a reasonable trading plan that identifies the following:
A. Entery Strategi – Be prepared to test hundreds of input settings!
First of all, prove to yourself that it works. For those with backtesting software (Metastock, AmiBroker, TradeStation, NinjaTrader, etc.), this process becomes enjoyable. You may not have the option to back up ten years of data and then the only option will be manual testing. Manual testing will take some time ofcourse, but the rewards are definitely worth it.
B. Money management strategy
Determine your capital that you can afford to place on each trade.
C. Risk management strategy
How much risk do you afford for each trade based on money regulation and stop loss size.
D. In Profit stop loss
Identify your stop loss when you are in profit. For example, a subsequent stop loss.
E. Initial stop loss
For those trading the fixed percentage risk per trade money management model, you will need to know your stop loss level to calculate your position size.
F. Record keeping strategy
Your trading statistics must be updated with the help of a daily CFD trading magazine.
G. Keep an eye on the economic calendar every day.
A very handy listing!
There are some trading apps that help you keep track of the high impact every day.
8. To be disciplined
Once you have managed to create your CFD trading plan, it is important that you are disciplined and adheres to it.
Keep in mind all the endless hours and sleepless nights that went to investigate your trading method. Do not let this go to waste! Trust the strategy that you have put down so much work on and the rest comes by itself.
How many times have you decided to take profits before your system exit said to?
You look at the position goes down and you shame yourself and confirm which good business man you are. You then see when the trade is moved back to your service, moving higher than your improvised exit and then blasting to the blue sky’s territory without you. Extremely frustrating!
Stick to your system. It will show you more often than not. If it is not sustainable, build a new trading strategy, but remember to be disciplined to maintain all trading rules.
9. CFD Trades – Remember to Scale in and out
How successful than a merchant will be, they are neutral for most of the year. That means they do not make any profits, but on the other hand they lose no money. But there is usually a window in a 12-month period of 2-4 months where the profit is above average.
It is very common that during your trading year a period of 2-4 months hits a purple patch. That is, a series of winnings in a row. Be patient because you can never know when the winning period will occur. It is important to keep your capital intact (preserving precious capital) in the short months.
What happens when the market turns?
Then it’s time to start adding your winning positions by scaling.
Do as the best trades, study how to apply pyramiding techniques and then how to do it on their trading systems.
Remember, scaling strategies work best with trending trading strategies. It is not suitable for scaling if your trading system does not allow for good trends.
10. A Postive mind
Keep the good mood alive!
Above all, it’s important to have fun with the trade, do not see it as life and dead situation. Watch funny trading videos, learn the prerequisites for achieving a successful share and CFD trading.
“fake it until you make it” and keep your confident that you can do this. Use positive affirmations daily to keep your thinking positive.
Regardless of which CFD broker or Forex broker you choose, whether you are trading CFD with direct market access or using CMC Markets Next Generation trading platform, you must take care of your CFD account.
See every minute as a present experience and opportunity! Good luck with your trading.