A trader’s life is made up of 50% risk and 50% brain work. Why did I say so? That’s because of the fact that you put yourself on the verge of bankruptcy the very moment you naively position your assets in the market and wait for results. Yes, you have to admit that once in your trading CFD life, you are lucky if you haven’t tried making a wrong move on your trades. Losing is not easy but the attitude to keep on trying to the “nth power” is something that could bring you closer to success. I am not saying that you make the same mistake over and over.
The point here is that you turn your losses into a learning experience through analysis. Identify what went wrong with your previous transactions and try to make a better move in your succeeding transactions. To start with, it also pays to review your CFD concepts and see if you’re missing a particular insight.
Common Attitude of CFDs in the Market
CFDs are contracts that are naturally based on the fluctuations of a particular merchandise in the market. Thus, the buying and selling rate of an asset in the market depends on its volatility. Volatility is defined as the movement of an asset based on supply and demand laws.
Reasons why traders favor CFDs over other trading instruments
- Trading CFD requires less expensive capital over other trades.
- CFDs provide a wide array of markets to deal with in a single account.
- CFDs can make a trader enjoy higher profits through leverage.
- CFDs are flexible, it allows you to trade both on a short term and long term basis.
- CFDs have extensive hedging features.
- CFD values are always stable.
- CFD transactions are accessible at any time of the day.
The Dangers of CFD Market
- Risks with CFD providers happen when the said personality fails to do his obligations to the client.
- Speculations on market rates based on volatility may be wrong.
- Changes in state rules and regulations on trading may have a huge impact on CFDs as brokers may require another payment for margin if this happens.
- Trader’s money is at risk for broker’s over withdrawal to hedge personal investments.
- CFDs may expose traders to several liquidity and gapping risks.
How to ease the burdens in CFD trade
- Opt to trade with a market that you are familiar with.
- Use your knowledge rather than your gut feel when placing a position in the market.
- Avail of a trade size that is suitable to your fund.
- Never spend more than what is deposited in your account to avoid loss or bankruptcy.
- Add applications that will help you protect your money from scams and other trading malpractices.
- Monitor market rates on a real time basis to help create an appropriate addition or closure of transactions.
- Apply what you think is the most appropriate trading strategy.
- Start eyeing for a small profit then slowly increase your goal each time you make the right move.
- Newbie traders should initially place leverage not more than thrice the size of the account.
- Write down your actions in every transaction so as to track the reasons behind every profit or loss.
The CFD trade is an interesting market that offers an enticing amount of profit when performed with the right knowledge. Its dangers are undeniably high as you could lose even more than your capital
once you make the wrong move. The catch with this market type has something to do with “challenges”. CFD is for those people who are brave enough to prove that the 50 percent chance of losing is nothing compared to an intelligent analysis of market rates.