13 CFD Trading Tips

CFD trading can be amazingly effective and can give consistence profits by following some guidelines and experiences of successful traders. You must carefully study and analyze your own financial goals in engaging to CFD trading. Becoming a successful CFD trader requires more than just picking the right markets to trade.

It requires strategic thinking, analyzing the market moves, spotting patterns and calling trends.

Trading Tips

1. Small but with a Plan

Have a good trading plan with your long term goals, style of trading, target markets and money management.  When you first start off there is no need to trade large amounts. You have plenty of time to find your feet.  When trading using margin, your losses can exceed your initial deposit.

No one is a born trader, it just comes with experience. So it makes sense to keep your trades small while you’re learning to trade and begin with small sums, and low leverage, while adding up to your account as it generates profits.

2Do not follow the crowd

Public opinion varies from person to person.  Block out others opinions. As this will make you always hop in your plan and strategy to trade. Do not be influenced to do trading on people’s views but find yourself a logical reason for reversing your position in market.

Work out the strategy that suits your needs as an investor, your attitude to risk and your long-term goals. Always have a reason for your trades, rather than acting on impulse otherwise, in the long run it could cost you a lot, if not all of your capital.

3. Not sure stand aside

Do not feel you have to trade everyday or you have to hold a position everyday. For a new trader this is costly. Successful traders develop practice and discipline and wait for the right opportunity. After they have taken a position and begin to feel comfortable, successful trader either reduces the size of the position or liquidates.

4. Decide on your entry and exit in a trade

When deciding to trade any instrument, you should decide in advance the level you will trade at. Then you need to be disciplined and wait for the price to reach that level. Try not to give in to temptation and buy or sell too early. You should also decide on two exit points – one where the trade has gone against you and one where the trade has gone in your favour. You should link these two levels using a good risk/reward strategy.

5. Trade Divergence

trading follower buys here

While trading watch the category in market for example meat, grain or metals. When you spot a wide divergence in a group it could signal a trending opportunity. Like if all grains except soybean are moving higher sharp traders would look for an opportunity to sell soy bean as soon as the grains in general appearance seem to be weakening.

6. Build a trading pyramid

trading trail stops to third position

Day trading can be lucrative but it is not easy way to get rich quick. Build a trading pyramid when you add to a position. For example: You buy 10000 shares of some stock. An ideal situation will be by adding an extra 5000 shares and then 2500 shares and so on providing the market is moving in your favour. Try to avoid inverted pyramid type of trading where at each addition you add more than your original position. This is dangerous trading technique because of the minor market reversal can wipe out your profit for the entire position.

Spit your entry into tranches to see if the market is moving your way before you become totally committed. Never add to losing position regardless of how confident you feel.

7. Trade the opening range breakouts

A breakout in the opening range may tell you the direction of trading for the day or for next several day . If the market rates for the opening range are high side go long and if the break out for the opening range on the border side then go short. This is a good price direction clue particularly after a major report.

8. Trade the breakout of the previous days range

Successful traders use this to divide when to establish or lift a position. It means never buy until the price trades above the previous day close or never sell until the price trades below the previous day close. Momentum traders commonly use this as they believe that the wait in the market is in their favour before adding to their position.

9. Trade a weekly breakout

A break in the weekly range can be seen as the signal of the trading direction for several weeks to come and therefore be considered a stronger signal. This tip can be used in weekly highs or lows.

10. Trade a breakout of monthly range

The longer the period you are watching the more the market momentum behind in decision. So mostly price breakouts are a even stronger clue to price trends and of vitally important to the position trader or hedger. When the price breakouts on the top side of the previous monthly high it is a buy signal and when the breakout is in the bottom side of the previous monthly low it is a sale signal.

11. Let profits run

Cutting your profits short can be the cause of unsuccessful trading Do not take profit for the sake of profit.  Cut your losses short when the market is against you. Admit your mistake by liquidating your position.

 12. Learn to take losses

Losses are a natural part of your trading process. And be patient. You are more likely to achieve your goals through a succession of small gains than via one spectacular trade. If you have a string of losing trades, don’t take it personally.

The market isn’t against you. You haven’t lost your ‘touch’. You simply have to review your trading plan against your ongoing performance. Gain an emotional ability to accept a loss without hurting your pride to become a successful trader.

13. Test your broker

Be prepared to switch your broker if you’re not getting the service you require. Test the service of your broker rigorously against your needs. Your choice of broker is one of your most important trading decisions. Draw up a checklist: do you need fixed spreads?

Free trading tools Or personal customer service. With this list of requirements you can find the best broker to suit your CFD trading goals.

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Risk warning: Your capital may be at risk. CFD trading is suitable for experienced traders and not beginners.