Recently, I explored Contracts for Difference trading in Plus500 trading platform. It has been an extraordinary experience for me due to the exponential complexity involved in the trading crypto currently. Due this complexity, Last couple of days were quite stressful for me as I had gambled my 50% of saving on CFD trading.
When I started the trading, Platform gave me bonus of the $200 if I earn 150 trading points. Initially I thought it would be quite easy to gain the 150 trading points as couple of transaction generated 1/3 of points. I was quite elated when I earned $730 very quickly.
It gave me adrenal to go for higher bets and I followed the temptation to start trading very quickly.
Without full knowledge of all the terminology, I started trading in full swing. I was taking large exposure as Platform also restricted me to take smaller position. After hallway thru I thought I have perfected the technique and I am going to gain lot of money but soon realty hit me very hard.
Soon things, Started going out of control and platform started cancelling my order as I did not have sufficient margin. I started transferring my saving to trading platform, and soon I was almost lost half of my saving.
I ‘wanted to share my experience of CFD trading to ensure that newbie take following tips before jumping on CFD trading as it very impulsive.
1: Small amounts.
When you first start off there is no need to trade large amounts. You have plenty of time to find your feet and everyone makes little mistakes at first. Remember that when trading using margin, your losses can exceed your initial deposit. No one is a born trader, it just comes with experience. So it makes sense to keep your trades small while you’re learning the ropes.
2: Logical Trading.
Many novice traders will look at a chart, decide the price is as low as it can go, and then place a trade going long (to buy because they think the price will rise). This is a common mistake, the chart can always go lower and you are actually placing a bet against the trend, without evidence to show that the trend is changing. Always have a reason for your trades, rather than acting on impulse otherwise, in the long run, it could cost you a lot, if not all of your capital.
3:Decide on where you want to enter and exit a trade
When deciding to trade any instrument, you should decide in advance the level you will trade at. Then you need to be disciplined and wait for the price to reach that level. Try not to give in to temptation and buy or sell too early. You should also decide on two exit points – one where the trade has gone against you and one where the trade has gone in your favour. You should link these two levels using a good risk/reward strategy.
4:Set yourself stop losses and don’t move them
When you first start trading, every single trade that you place should have an appropriate stop loss in place. This enforces your exit levels and will help to protect your capital. Novice traders will tend to learn this the hard way, but moving your stops further away when a trade goes against you is almost the same as not placing a stop loss order at all.
You should always have a reason why you have set a stop loss in the first place, and when you move it further away, you have just ignored that reason. Discipline is one of the keys to successful trading. Remember that you want to cut your losses quickly and run your profits – you shouldn’t be running your losses.
5: Be wary of doubling up
When faced with a potentially losing trade, some traders will look “double up”. This involves buying or selling more of the same instrument at the new lower price, bringing down your average entry price. This is a very risky strategy which might work once or twice, but it will usually result in more losses in the long term. You should only “double up” if you have a very good reason for thinking that the trade will go in your chosen direction.
6:Know when to get out of a losing trade
No matter how experienced you are, you will always experience losing trades. The trick is to be disciplined when you’re looking at a losing trade – you need to cut your losses quickly, rather than letting your losses run in the stubborn hope that the trade will turn in your favour. The key to profitable trading is keeping those inevitable losses small when they do happen, and giving your profits room to run. To do this you must take the emotion out of your trading – be disciplined and ruthless when it comes to losing trades.
7:Monitor your positions
You’ve probably put careful thought and planning, not to mention your own funds, into your open positions. Give them the attention they deserve and monitor them. Even if you have the relevant stops and limits in place for each trade that you do, always check up on your positions on a regular basis. If they start going against you, you will be able to react and take action if necessary. Primarily, you need to ensure that sufficient margin is maintained in your account so your positions aren’t closed out.
8:Know when to let your profits run
One of the hardest things to master when you first start trading is making sure you don’t take your profits too soon. Obviously you want to make the most out of a profitable trade and if you take your profit too soon, you could be missing out on possibly much larger profits.
9:Stick with what you know
In the beginning, stick to what you have the most experience in. You want to give yourself the best chance of making money at the start. Once you have built up more trading knowledge and have hopefully learned from some of your mistakes, you will be ready to move on to other areas. Always fully research new areas that you’re interested in trading. In fact, you should always fully research any instrument that you are looking to trade. Check the business news and make sure you know the market hours that it trades and what typical ranges it covers during a trading day.
You can also look at company reports and use financial websites to help you with your trading. Always remember to check the margins and check your total exposure on each trade that you do.
10: Diversify to reduce risk
One simple way to lower your risk is ”diversification”. This involves spreading your capital across different investments to reduce risks, such as opening CFD positions over a variety of different equities and sectors. For example, if all your investments were in the mining sector and there was a sharp decrease in the price of copper, all your positions would suffer losses. But, if you had mining, retail, and pharmaceutical stocks, you would be less exposed to losses.