Jones Mutual: CFD trading Advice

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Contract for Difference, or CFD, is a type of trading where you speculate on the rise and fall of a financial product.

This can include Forex, indices and commodities with hundreds of different markets available. You will need a good trading platform for your trades and you also need to build a strategy for success. Here are some tips on doing this.

Preserve your capital

In the book ‘High Probability Trading’ Marcel Link talks about ‘preserving precious capital’ when you start CFD trading. In other words, the emphasis isn’t so much on making money but on not losing it. Trades are made cautiously with the aim of preserving the capital you have put into the venture to keep trading. Even the best systems in the world only work if there’s money being invested in to them.

Get a trading edge

Everyone wants to make money and they will happily do so at your expense. Therefore, you need to build a trading edge that helps you be the one making the money, not the one losing it. There are many ways to do this including:

  • You are great at not making mistakes
  • You trade quickly and react to news events that influence your market
  • You have brilliant money management skills
  • You are very patient and wait for the right time to trade

A trading edge can comprise of several factors, or it can be one skill you focus on to make CFD Trading work for you. We all have weaknesses and tasks we aren’t so good at, so focus on playing to your strengths and minimizing the negatives.

Watch that leverage

CFD leverage is a powerful thing and, when the trades are going well, it is easy to get excited and increase the position sizes you are working with to make more money. But always remember there could be a loss hiding around the next corner.

Don’t jump on the emotional roller coaster of making big gains and losses by losing control of your leverage. Instead, start small and keep your total exposure relatively low compared to your capital base. When you first start, leverage up to a maximum of three times your account size only.

Use CFD stops automatically

Like mastering leverage, you need to get the hang of CFD stops to be successful. Every trade needs to have a clearly defined stop assigned to it, ideally done outside live trading when prices are moving. The idea of the stop is simple – it removes emotion from the decision because you have already put it in place. Don’t change your stop once it is set!

Set trading goals that are realistic

Every trader wants to make a ton of money and become famous for their phenomenal trading skills. But any successful trader will tell you the reality is not so glamorous. You set trading goals that are realistic and sensible and work towards them. At first, it is about learning your strategy and preserving that capital. Then it is about building on what you have learnt and increasing your profits. But always being realistic in what you aim to do.

Find the right platform

There are ample platforms out there for you to make your trades and finding the right one is essential. Jones Mutual offers a great balance of features as well as being user-friendly and offering plenty of advice and tips to help you start CFD trading. You can sign up for an account today and start your trading experience immediately.