Making successful trades every time is not having any formula. Perhaps there are some proven ways and habits to increase the chances of success. CFD trading can give some short-term profits and not a short-time big-time scheme. Keep in mind the long-term goals while making trades every day.
Whether you are a beginner or an expert in trading CFDs, these tips will help to make more winning trades.
1.Utilize Stop-Loss Orders
It is a fact that losing trades is inevitable, but a trader must make sure that he will not lose a lot of money. The Stop-loss tool is an important tool to use. It cuts losses before it is too late. It works when the certain value of an asset drops, it will back out of the trade. It will lose some money but not all that has been put into it.
Generally, using a stop-loss allows the trader to move on from a losing trade and start into another one. Losing is a part of trading but using stop-loss will stop from losing a lot more money that will leave trading permanently.
2. Begin With a Demo Account
This is the most important tip. A demo account is used to practice trading CFDs without using real money. Using a demo account will not earn money but it will help to gain trading experience based on the real market. The top thing about this is that there is no money at risk involved.
Once the trader makes enough winning trades that make him confident to put real money, he can switch to a real account. It is advisable to not switch to a real account after winning one or two trades since it can be just a coincidence. Have 50+ winning trades in a couple of weeks or months. This will make the trader familiarize with the market.
Take time to learn before proceeding to the next step. It is not a race and there is a high risk of losing a lot of money if it is too early to take the next step.
3. Improve a Trading Strategy
There are a lot of strategies to predict the price of an asset. There is a difference in characteristics of every asset, but its technical analysis chart is very alike across the board. Knowing or developing a method on how to analyze these charts is very essential to become a successful trader.
It is also a good practice to think of some situations and plan how to act on those. A trader should think of what the best thing should do if the price increases to 10% or if it drops into 5%. These will help the trader not to panic since there is a plan made ahead of time.
4. Prepare for the Red Days
Red days are the days that the trader loses money. This is not stressful if there are plans on days like these. Securing against the downside will naturally make the upside secure by itself. This means that there should be extra money to deposit in the account and money for living expenses.
5. Diversify Trades
Diversifying trades is one of the tips to prevent losing more money. Do not put all the money in one trade. Make multiple trades that have fewer chances of losing. Putting all the eggs in one basket is a very bad idea in trading CFDs, stocks, or any type of investing.
Diversification is important because in 10 trades if 2 of them lose, there are still 8 winning trades that are still profitable.
In general, having multiple sources of income will make someone stable. This can be trading different types of assets or having a side job that can supplement income from CFD trading. Some make CFD trading a full-time job yet most people burn out instantly, so it is still best to have multiple sources of income.