Minimizing Your Risks in CFD Trade
A lot of people think that CFD trade is not safe.
Of course, you do not really have control over the market.
However, CFDs are another financial products that you can invest in any way you want.
And this is where the risk comes in.
If you want to be adventurous in your trades, you can trade CFDs in a risky way if you don't manage your money correctly and trade well beyond your means.
It may seem like a good strategy at the time, as it will mean your wins have high returns, but then so will your losses and you could very quickly wipe out your trading capital.
However, you are not trading the markets to lose all your money.
Losses are inevitable.
But your goal as a trader is to win bigger in the markets than you lose.
You can minimize your risks when you focus on the golden rule of trading which is to"let your profits run and cut your losses short.
" For instance, you can use leverage in a safe and responsible manner.
CFD trade allows you a huge leverage on your trading capital.
You can also opt for extremely low levels of leverage.
This means, you are in control of how you use your leverage in a non-risky manner.
When you're starting out it would be smart to keep your leverage at a minimum and don't trade beyond your means.
If the average leverage of a trade is 10%, then put 10% to 15% of your capital into your CFD trade account and trade it up to the total amount of your trading capital, not beyond it.
Treat CFD trading like shares.
You can then offset the remainder of your capital into a high yield savings account to offset the overnight financing costs of your CFD trades.
Another way of minimizing your risks is not over trading.
Over trading happens when you are trading more than you should - beyond your capital means and risking a larger amount on each trade.
Focus on the number of trades and the size you are trading.
You probably have the mindset that the faster your trade, the more you gain.
Or you feel like clicking on a trade when you are alone, sitting in front of your computer.
Then, you are in danger of over trading.
This could lead to higher brokerage charges.
And over trading can interfere with your mindset as a trader in the long run.
With these situations in the market, it is best to have a trading plan.
You need to have a trading plan before you invest.
You need to map out a trading plan that you can stick to when you are finally trading CFDs.
You can refer to mentors to assist you in mapping out your strategies in the market.
Know more about discovering and working out your own trading plan.
CFD trade is not a risky business if you know how to minimize your risks and this can be done through key money management strategies that should be a strong focus in your trading plan.
There is a great book available that can assist you in developing your trading plan.
Smart Trading Plans by Justine Pollard is your step-by-step guide to developing a business plan for trading the markets.
It has been listed as Top 10 Best Selling Finance Book in Money Magazine.
This will help you implement you own trading plan to become a profitable trader.
Of course, you do not really have control over the market.
However, CFDs are another financial products that you can invest in any way you want.
And this is where the risk comes in.
If you want to be adventurous in your trades, you can trade CFDs in a risky way if you don't manage your money correctly and trade well beyond your means.
It may seem like a good strategy at the time, as it will mean your wins have high returns, but then so will your losses and you could very quickly wipe out your trading capital.
However, you are not trading the markets to lose all your money.
Losses are inevitable.
But your goal as a trader is to win bigger in the markets than you lose.
You can minimize your risks when you focus on the golden rule of trading which is to"let your profits run and cut your losses short.
" For instance, you can use leverage in a safe and responsible manner.
CFD trade allows you a huge leverage on your trading capital.
You can also opt for extremely low levels of leverage.
This means, you are in control of how you use your leverage in a non-risky manner.
When you're starting out it would be smart to keep your leverage at a minimum and don't trade beyond your means.
If the average leverage of a trade is 10%, then put 10% to 15% of your capital into your CFD trade account and trade it up to the total amount of your trading capital, not beyond it.
Treat CFD trading like shares.
You can then offset the remainder of your capital into a high yield savings account to offset the overnight financing costs of your CFD trades.
Another way of minimizing your risks is not over trading.
Over trading happens when you are trading more than you should - beyond your capital means and risking a larger amount on each trade.
Focus on the number of trades and the size you are trading.
You probably have the mindset that the faster your trade, the more you gain.
Or you feel like clicking on a trade when you are alone, sitting in front of your computer.
Then, you are in danger of over trading.
This could lead to higher brokerage charges.
And over trading can interfere with your mindset as a trader in the long run.
With these situations in the market, it is best to have a trading plan.
You need to have a trading plan before you invest.
You need to map out a trading plan that you can stick to when you are finally trading CFDs.
You can refer to mentors to assist you in mapping out your strategies in the market.
Know more about discovering and working out your own trading plan.
CFD trade is not a risky business if you know how to minimize your risks and this can be done through key money management strategies that should be a strong focus in your trading plan.
There is a great book available that can assist you in developing your trading plan.
Smart Trading Plans by Justine Pollard is your step-by-step guide to developing a business plan for trading the markets.
It has been listed as Top 10 Best Selling Finance Book in Money Magazine.
This will help you implement you own trading plan to become a profitable trader.
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