Research has shown that many online traders, especially beginners are scared of CFD trading. There’s a lot of knowledge and skills to learn and strategies that you thought you understand better become useless with time. These are some of the reasons there is an aura of fear and anxiety among newbie CFD traders. It doesn’t need to be very scary.
Understand what CFD trading is all about
You need to familiarise yourself with what CFD trading is all about. Basically, this is a form of trading that enables you to speculate on the future prices of financial markets such as indices, treasuries, currencies, commodities, and shares. CFD brokers such as CMC Markets give you an online platform where you can predict the rise or fall of financial market prices. You see. It is not as difficult as you may have thought.
Why CFD trading is so important?
You also need to understand why this form of online trading is so important. Among other benefits, CFD trading compensates you regardless of whether the price of a financial market is rising or falling. There is not stamp duty to affect your earnings and the transaction costs are generally lower. This guarantees you more earnings without any hassle.
Know the three main strategies of CFD Trading
These strategies are almost similar to the one used by those who trade in more traditional financial products such as equities. They hedging strategy, trading the world’s markets, and pairs trading strategies pays great dividends. CFD are traded with leverage so all these three strategies give you more exposure and flexibilities to more earnings.
How To You Succeed In CFD Trading
While we can’t guarantee success when trading on CFDs, there are nevertheless a few measures that will increase your chances of profiting from them.
- Make sure you have an edge
You need an edge that you can use with accuracy, precision, and consistency in order to get desired returns. The best example of an effective edge is the money management plan. Whichever type you use, you need to be able to quantify it terms of trading frequency, the risk involved, possible returns, and win rate.
- Control your CFD leverage
Most successful traders started small with their CFD leverage. They also kept their total exposure as low as possible relative to their capital base. You should also emulate the same in order to realize more profits.
- Strictly adhere to the CFD stops
When trading on CFDs, you may get big losses if the position moves in a position that does not favour you. To minimise the risks of losing, you need to place CFD stops to magnify and mitigate the loss.
- Establish realistic goalS
You need to write down things you want to achieve at the end of the day. You also need to focus only on objectives that will help you realise your goals. You also need to eliminate the hurdles that distract you from achieving your set goals.
- Keep a CFD trading journal
This journal is important as it allows you to keep and schedule records of trades you plan to make. It also creates a learning experience which you will remember in future. The journal keeps records of things you traded in, reasons you made the trade, time you made the trade, possible profits or losses you may incur, and much more.
- Have a comprehensive trading plan
Whether you are a newbie or an experienced trader, you need to establish a comprehensive actionable trading plan. Your plan should include important things such as strategies you plan to use.
- You must be disciplined
After you have come up with an actionable trading plan, the next important thing is to stick to it no matter how harsh the challenges are.
- Scale in and out of trades
Most successful traders do not make profits throughout the year. There are periods they make huge losses. As a newbie, you don’t know these periods so you must keep your eye intact throughout the year.