By Daniel Quinn
When it comes to online trading, any expert will tell you that the most important thing to remember is that there is no “get rich, quick” trick or strategy. That if you are in it for the long run and looking to build a solid online CFD trading foundation then an effective strategy with a consistent rising equity curve and minimal drawdowns is what needs to be your primary focus. Here you will find some top tips to better your CFD trading experience.
1. Always start small
As previously mentioned there is no need to rush when you are starting off and therefore there is no need to trade large amounts through your broker at the beginning. Online CFD trading is undeniably a “skill” that comes from experience and learning the proverbial ropes – so take your time and bear in mind that initially your losses may exceed your initial deposit – hence the reason to start small. Find your feet and take it slow at the start.
2. Impulse trading is not always a good idea
Even though it is commonly suggested that we “go with our gut” this is not the best strategic stance to take when trading CFD’s. It is very easy to look at a chart and decide that a certain price is as low as it will go. Should you find yourself in this position, bear in mind that a chart can always go lower and that you are in actual fact you are making a bet against the trend with all the evidence. Online trading requires strategy and knowing what and why you are doing when placing those bets.
3. Go with what you know
Going with the trend of following your gut – in the world of trading it is essential to stick to what you know and what you have experience in. Initially anyway. As soon as you have garnered a sufficient amount of online CFD trading knowledge and built a foundation of skill and trading strategy then you can start trying out new things and perhaps even taking more risks. That said – you should always research new areas of trading and make sure you are well versed in the financial and business news and markets are doing on a daily basis. It is also important to keep checking the specific margins as well as your total exposure on the trades you make.
4. Doubling up isn’t always the best option
When it comes to online trading, especially when it comes to CFD’s the sentiment “different strokes, for different folks” is often used, especially when presented with the dilemma of losing a potential trade. In this case – some traders might suggest “doubling up”. This is when you may be advised to buy or sell more of the same instrument, but at a lower price, ultimately bringing down your average entry price. This is considered a risky strategy and should only be done if there is a very good reason suggesting the trade will move in your favour.
5. Diversification reduces risk
By spreading your capital over a variety of investments is a sure fire way to reduce your trading risk. One way of doing this is by opening your trading positions over an array of different equities and sectors. Again it’s a case of putting all your eggs in the proverbial basket – better to expand your trading, open more than one CFD trading position, and ultimately you will exposed to substantially less losses.