Richard has more than two decades of experience in the financial markets and has had his writing appear on CNBC, NASDAQ, Economy Watch, Motley Fool, and Wired Magazine
There are a few things that all successful traders have in common, whether they are trading Forex, stocks or any other market, and they have nothing to do with specific trading strategies, the technical indicators that they use or the broker that they choose.
These are big-picture issues that are easy to overlook when you are a new trader just looking to make some fast money on the stock market. With all the “simple trading tips” articles out there, it is easy to take a focused, short-term view of CFD trading, but this is not the way that successful traders work. Here are a few of the important traits that successful traders have in common:
Many new traders start CFD trading to make money, plain and simple. They have heard that online trading has brought the markets to the masses, and they can make money from their kitchen table, their sofa or even from their smartphone while drinking beer on a beach. They love making money, but they do not necessarily love the markets, which is a problem.
Making money on the stock market is not easy, no matter what online ads and forums tell you. There is a big learning curve, and as with anything, learning is a lot easier when you love the topic. Traders who decide that they will take a quick look at their broker’s introductory online tutorial, read a basic book on trading or perhaps rely on a few of the more popular technical indicators that they do not fully understand are not going to find success with CFD trading or any other kind of trading.
Successful traders love learning about the markets. They devour every tutorial, video training and webinar that their broker provides, and they read a hundred books on trading. They learn the ins and outs of every technical indicator that they intend to use, one by one. They learn about fundamental analysis as well as technical analysis, and they live in their financial news feeds, digesting new research and evaluating new trading strategies all day long. This is how they become successful, because with trading, as with most ventures, the learning curve tends to be steep.
You may have heard that you must spend money to make money, but there are still plenty of new traders who come to the world of online trading with very little capital, which is hardly surprising. They have heard that it is easy to learn CFDs and that CFD trading means that you do not need a lot of capital. You can get a substantial amount of leverage with most online brokers, even if you are brand-new to trading, and you can use every penny of that leverage to make money with CFD trading. Some brokers have a minimum deposit requirement of just £100.
Technically, this is all true. In practice, this attitude will not get you far with CFD trading. Yes, you can start with a small deposit, but a bigger one is better. No new trader should start trading with maximum leverage, even if their broker hands it to them on a plate, which they are generally happy to do.
If you study trading tips and strategies and devote a large chunk of time to trading with a demo account, then it will soon become obvious that apart from anything else, successful traders must be comfortable with strategic loss-taking. Traders with insufficient capital tend to be bad at this for obvious reasons. Sometimes, they are also bad at profit-taking because they desperately need just a little more profit before they exit their position. Those that can afford to take losses and profits strategically will be much more successful.
Having a love of the markets and sufficient capital will help traders develop the third thing that they need to be successful with CFD trading: the right mindset. Successful traders need discipline, clarity, fortitude and patience. They need to learn to keep their own counsel, follow their systems and trust their analysis. They need to remain calm under pressure, and they need to accept that despite all their efforts, things will sometimes go wrong.
The right mindset is what allows some traders to find the patience to wait things out when market conditions are not favourable, allocate risk responsibly and keep funds in reserve, even in the most bullish market. It is what lets them stay focused on their techniques, their strategies and their targets. The right mindset allows them to stick to their style of profit-taking, the appropriate types of trades for them and their planned entry and exit points, no matter what else is happening. In short, successful traders often exhibit the exact opposite of the reactive, frenzied behaviour that the inexperienced person might associate with the high-pressure world of trading.
Closely related to the general mindset is the idea of money mindset. Those with a strong money mindset are not too worried about short-term scarcity. They have the confidence to believe that there is plenty of money to make on the markets, but they do not have to make it all at once. This gives traders the discipline that they need to put good risk management strategies in place. They resist the temptation to throw all their capital and available leverage at every deal. They have the self-control to invest modestly and profit-take modestly, secure in the knowledge that there will be other deals on other days and more profit to make in the future.
You may be just starting to learn CFDs, or you may have been doing this for a while now and are wondering why you are not as successful as some of your peers. When considering what you can do to accelerate your success, consider improving on these three “big picture” issues alongside all the necessary specifics of learning solid systems and strategies.
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage . 75 % of retail investor accounts lose money when trading CFDs with this provider . You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money .