Strategies are the foundations of successful trading. Working out the right strategy for you is a delicate balance. The more you educate yourself with the inner working of CFD trading, the quicker you will become a more successful online CFD trader.
CFD’s are an exciting way to trade. Contracts for difference, or CFD’s as they are more generally known; let you go long or short on all markets, without needing large amounts of money to get started. Many traders of online platforms such as XTrade, tend to begin developing strategies early on, and work on them as they build experience.
These are my top 7 strategies available for successful trading
- Rely on logic over intuition
The first rule is to remain logical at all times. It’s easy to get carried away with emotions and superstitious behavior based on patterns you think you are seeing. Stay away from making decisions based on your intuition alone. It may benefit you once or twice, but truth be told, it barely gets you anywhere in the long run. Successful trading means sticking to a logical and calculated plan, not just gut-feeling – intuition can be wrong, but plans based on facts are more reliable.
- Maximize your trades – limit your risks
Don’t put all your eggs into one basket – Any trader who invests too much trading capital into a single trade is potentially heading for disaster. By never risking more than 5 per cent of available capital on any single trade, a trader can ensure that even if they incur a loss, it won’t have a crippling effect to their daily trading.
Leveraging works in similar ways as a mortgage. When you want to buy a house, you will need make a down payment and get a mortgage. In this case the mortgage gives you the ability to buy the house that you want. When you sold your house you pay off the mortgage. And what you have left is your profit. The same principal applies for CFD leverage. Let’s say you want to buy 100 Apple Inc. shares. With CFD Apple Inc. shares you only make a small down payment to acquire 100 shares and the broker will finance the rest. The broker is behind much of the position and the difference between the opening and closing price will eventually settle with your own balance. You are at no time the owner of the security; the broker will control both the buying and selling. When investing in CFDs, you have no further responsibility since you are not the owner of the physical effect. You can learn more about leveraging on reputable sites such as XTrade Academy.
- Use stop losses
A great way to minimize risk is to set a stop loss on each trade and stick to it – doubling up simply doubles the risk (see cut your losses below). Trading without a stop loss could lead to an early end of your trading career. A stop order enables you to close a CFD position below the current market price and is the main means stock market traders use to manage risk on each trade that they take out. Use stop losses, but give the market enough space to settle. The market goes through its natural fluctuation. Ups and downs will happen before heading in any particular direction.
- Keep track of your trading history
Every “mis-investment” doesn’t have to be a lost investment – if you learn from your trading history. Analyzing what went wrong previously, will build your understanding and aid in your future investment strategies. Building a positive feedback in your investments can only build your confidence and experience, ultimately making you a better trader. Online platforms such as XTrade have your trading history saved on your profile. This is an easy and organized way to keep track of things.
- Create your strategy and stick to it
There is nothing worse than backing out of a well-planned strategy, mid trade. You have probably spent hours constructing the perfect trading plan, don’t fail yourself by failing to follow through. Changing strategies mid-way could cause you to lose your investment and lose valuable trading experience, making your strategy useless. Experience will give you confidence but you must maintain order. As professional traders know, consistency and persistence is the key to success.
- Choosing the right CFD
4 Seasons: With thousands of equity CFDs to select from, one factor that most traders overlook when they commence trading is equity CFD price seasonality. This is one of the most apparent factors influencing share CFD prices. If it’s summer time you must consider CFDs which historically have price moves up throughout this time of year. While seasonality effects are not enough to justify your choice of a trade, they are certainly a worthwhile element to consider for CFD traders. If the effects are strong enough and consistent enough, they should certainly be taken into account. Keep track of things through your online broker. XTrade offers up to date charts and analysis of the markets.
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