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What makes a successful CFD trader?

Walter Peters


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Have you ever heard that the definition of insanity is doing the same thing over and over again and expecting a different result? By that definition, all successful CFD traders are just a little insane, because they will do the same thing over and over, following a disciplined trading strategy, and despite their best efforts, the results are often very different. That’s because it’s impossible to accurately predict the market 100% of the time. Even if you have mastered a few technical indicators, follow a tried and true trading strategy, and stayed in markets you know well, you are going to have losing trades. The first key to successfully trading CFDs is accepting that bit of insanity as a cost of doing business and keeping your emotions under control. Other habits of highly successful CFD traders include:

Know when to take profits and cut losses

Discipline is incredibly important, especially with leveraged trades. When you let fear or greed into your trading decisions, you will lose more often than you win, and your losses will be larger than they would otherwise be. Set a profit target and a stop for every trade that is in line with your trading strategy—and stick with it.

Test before you trade

Demo accounts are there for a reason—to test your trading theories and practice your strategy. Use them to hone your skills and to make sure your trading strategy is producing more wins than losses.

Choose the right broker

It’s hard to overstate the importance of a good broker for successfully trading CFDs. Check into everything—ease of order entry, quality of data, marginal transaction costs, and the availability of educational resources. Comparison shop before you decide to go live with a CFD broker.

Know your psychological barriers

Some traders can’t take the pressure of watching ticks; they do better by setting limits and stops and walking away from their computer. Others get paralyzed by movements in their cash balance. The idea is to know what triggers you to make trading mistakes and devise strategies to get around them. Emotions are the enemy of successful trading.

Don’t risk more than 1% of your capital on a trade

Some traders are comfortable risking up to 2% per trade, but if you are just starting out, 1% is a safer limit. This doesn’t mean you only trade with 1% of your capital at a time, but that you set stops so that you never risk losing more than 1% on a trade. If you have $10,000 in your trading account, you shouldn’t risk more than $100 on any single trade.

Don’t take it personally

You will have losing trades, no matter how long you’ve been trading CFDs, or how careful you are with your trading strategy. When you internalize the loss, you lose confidence, and you may be tempted to shake up a good strategy without a good reason. If you’re particularly upset about the outcome of a trade, step back for a few hours or a few days, and revisit it later to see where it went wrong. If indeed you do need to change your strategy, you’ll see it more clearly from a distance.
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