Many people think that they understand the rules of CFD trading. However, even established traders have to be keen and follow a specific way lest they make losses. The skills can be acquired either by taking the time to learn or by gaining experience. Traders with CMC Markets share the skills for great CFD trades.
- Forget emotions, use logic
Losing money is a painful experience especially when the anticipated gain was huge. When trading, people should leave emotions from the business of the day. Emotions will make you deliver wrong judgment and act in an offhand manner. Therefore, to achieve success, use the logical way of thinking. Maintaining logic is a tough task especially when you are losing your money. It is, therefore, an attribute in a few successful CFD traders.
- Let Profits heal the losses
Traders will always have moments when they make profits and losses. They should allow the flow of benefits to cut the losses before reinvesting in their accounts. You should not cling on a losing trade. Also, do not cash in on a winning trade early. Allow the profits to flow so that they may reduce the losses you made the previous day.
- Resist the temptation of a single trade
There is a huge difference between trading and gambling. Betting 50 percent or 100 percent of your trading capital on a single trade is gambling. An experienced trader will bet on various deals. When one hits losses, the others will bring in profits that heal the loss. It is advisable that do not risk more than two percent of the available capital on a single trade.
- Perfect on your timing
How you time when to get in and out of the market plays a significant role in your success as a trader. Established traders enter the market at the right time and exit when needed to get out. However, those that get in early and delay to get out are perennial losers. Profits will avoid their accounts for they fail to understand the basic tenets of CFD trading.
- Mix technical and fundamental analysis
Great traders will always combine both the technical aspect and fundamental analysis. They stand a good chance of making profits compared to those that use a single means. Technical analysis is the actual point of entry while fundamental analysis acts to trigger a trade. By combining the two, the chances of success are all-time high.
- Identify losing traders and stay away
Good traders understand a majority of the trades available in the market. Therefore, to maintain success, they should stay away from trades that are known to spoil the soup. One should distinguish trending lines and range-bound markets. Experienced traders stick to the use of trend lines.
- Using stop losses wisely
A stop loss is the maximum lose you are willing to take in a trade. It is a point beyond which you close a trade. Therefore, it is an essential part of CFD trading. However, how it is applied will determine if it becomes useful or not. Always use a stop-loss, but give it time to breathe. It will avoid instances where you pull out when the trend was about to turn to profitability.
- Understand your personal weaknesses
Personal weaknesses should be taken into account. Before engaging in CFD trading, one should understand himself. You should know what parts are regarded as weakest to you. Sharp traders do not give room to fear and greed. They can tune their psychological demands and align with good trading practices. One should trade according to the plan and have a strong money management skill.
- Understand risk and reward
You need to understand that more risk does not necessarily mean more gain. You can risk more and lose highly. Never engage in a trade where the potential risk is smaller compared to the potential reward. In most cases, the chances of losing are high. Make a clear judgement on when and when not to get into the market.
Keenly diversify your portfolio. You cannot claim to have diversified when you have shares in different companies in the same industry. The chances are that when one does not gain, the others will follow suit, and you will suffer a blow.