CFD trading is one of the most popular trades today because of the “easy investment” where people can buy stocks quickly and easily through trading platforms on any device. Plus the leverage in this trade is crazy, making it desirable to small and starting traders.
But even with the many benefits that come with CFD trading, you should know this trade is also one of the most volatile. Since you’re met with high leverage, consider the risks elevated.
You have to be really careful when opening a position and getting into CFD trading. And if you’re still heavily invested in this trade, you can still become successful. All you have to do is strictly follow and avoid certain things and habits. To get you started, down below is a list of things NOT to do as a CFD trader:
1. Do NOT Enter a Trade You Know Little About
This is something that has been happening a lot lately due to trading being pretty accessible. So anyone can literally invest as long as they can meet the minimum capital. This is something not a lot of people realize until they lose the money they’ve invested in.
Although a lot of promises have been made online about investing and profiting heavily, this is something to take with a grain of salt. Yes, you can have lucrative trade, but it’s not due to investing in certain stocks, it’s knowing what you’re investing in and what you’re doing.
Before entering any sort of trade, consider knowing more about it and its market. You can try attending webinars and seminars, taking online courses, self-study, and so on. This is usually overlooked by many starting traders today, be the change and learn your chosen trade before entering.
2. Do NOT Follow What Other People Are Doing
Although there is nothing wrong with getting a bit of inspiration, following other people’s trading tactics is something you shouldn’t do simply because it might not work for you. You need to understand, trading is different for everyone since we all have different styles, goals, preferred processes, and so on.
You might see tons of people showing off their success and telling others how they achieved that success. And any aspiring traders would follow what they did and sure enough will be discouraged when they don’t reach the same success, overall letting that incident define their trading career.
Before trading or practicing, consider picking out a trading strategy, a platform, and a market that works for you. Remember finding your niche in trade is a total game-changer! So before trading, find your own trading persona.
3. Do NOT Make Trading Decisions Based on Emotional Impulse
Another thing you should greatly not do when trading is make decisions based on emotional impulses. This is because the choices you’ll be making become irrational which then can lead to causing more harm than good.
Opening a trade after suffering a loss with the intention of recovering your losses illustrates a choice that was driven by emotion. This happens a lot and sometimes you won’t even notice it happening. So be cautious!
A thing you can do to help you with this is to use a stop-loss order. A stop loss order is an order you can place with your platform that closes a trade when it reaches a certain limit you’ve put up.
So, to minimize your losses try staying focused on your trading strategy more than on potential outcomes that may not really lead to a win.
4. Do NOT Spend More Than You Can Afford
While you’re trying to avoid emotional impulse, also try defeating “impulse” itself. Tons of failing traders today suffer from over wagering in trade, which resulted in more loss than gain. This is, again, something most people overlook.
Before investing, consider an amount you can afford. A way to know if you can afford something is if you can buy it twice. So if you’re planning to invest $10,000 make sure you have $20,000. This is to make sure you can afford a loss when it does happen.
5. Do NOT Trade After a Breakout of News Trends
Wagering right after a news break out is something risky since the market is still unstable at this point. So you might be ending up with something less or more than the market outcome when it settles. A thing to do as a “good” trader is to invest in stable grounds where your strategies and calculations can make more accurate speculations.