CFDs Trading Tips

How to Start Trading CFDs

You do need a few things to start trading CFDs, but the good news is you don’t even need a lot of time. Once you’ve made the choice of which broker to trade with and deposited some capital all that’s left is to place your first trade.

CFD Trading Steps

A CFD trade follows several basic steps, no matter if you are thinking of trading in gold, or individual stocks, or cryptocurrencies. Just follow these steps to make your CFD trade:

1. Choose an asset to trade.
2. Decide if you think the price will go higher or lower.
3. Place a long trade if you think the price will go higher, and a short trade if you think the price will go lower.
4. Wait to see the price of the underlying asset move (preferably in the direction you’ve predicted).
5. Close out your trade and collect your gain or accept your loss.

Tips for Experienced Traders

Experienced traders can take advantage of the fact that some aspects of trading are probably fairly automatic by this point in their career. They probably don’t have to think as much about their take profit levels and they likely don’t have to remind themselves to set a stop loss. There are still some things they might want to improve upon in their trading strategies however. These are the things that always require attention, such as money management and risk management. Experienced traders can also benefit from learning new strategies and from studying new assets they haven’t traded before.

Tips for Beginners Traders

When you are just getting started with CFD trading things can seem overwhelming because there are so many aspects of trading to consider. Beginners can make this helpful for themselves by focusing on the basic aspects of trading when they are just starting out. One area where new traders can get carried away is with leverage. It’s very exciting to think about increasing your winning trades by 10 or 100 times, but leverage can work the other way as well, causing horrendous losses. Besides reining in the use of leverage we can also recommend new traders learn to use stops on all their trades to minimize potential losses. Finally, just get used to accepting any losses when they occur.

Planning

Whether you’re a beginner trader or one with years of experience one thing is consistent – you’ll need to plan your trades to experience the most success. This needn’t be difficult or painful and once you become used to your own planning process it will become second nature. Your planning not only includes creating a trading system, which can be based on any technical or fundamental triggers, but it also includes testing your system to ensure it is successful. You should spend as much time as necessary demo trading any strategies you come up with to see if they are really successful or not. Other aspects of planning include setting take profit and stop loss levels on all of your trades and using proper money management and risk management.

Risks

While CFDs do present quite a few benefits to traders looking for an attractive way to speculate on assets that might otherwise be expensive to buy and sell, it also comes with risks. It’s important for traders to know these risks in order to avoid them. One of the key risks is the need to maintain an adequate amount of margin when hit with leveraged losses. There can also be liquidity issues to consider when trading in CFDs. Overall the process of trading CFDs is quite satisfactory so long as the risks are known and accounted for by the trader.