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9/13/17 at 03:29 AM 0 Comments

Costly and De-Motivating Common CFD Trading Pitfalls to Avoid

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CFD trading leverage is a boon but only when right trades are made, but the scenario can be a disaster in case you get entangled in a losing position.

Everyone makes mistakes but when trading CFDs, it can turn out to be expensive. Traders entering the markets with high hopes, ultimately give up losing more money and feeling de-motivated.

It is crucial to take care and avoid the common errors CFD traders are inclined to make. With a little consideration, it is possible to stack odds more rationally, in your favor.

Common trading pitfalls to avert

Over leveraging
Over leveraging is one of the most frequent errors CFD traders experience. You cannot judge this aspect but it is a process, which includes defining the perimeter involving risk and reward. With CFDs, greed motivation can be destructive. Therefore, while exercising CFD trading absolute discipline is necessary.

While handling margined investment products, keep an eye on the exposure. Ensure that your risk is distributed and controlled for success. Composed and calm approach to risk is crucial or you can end up like veteran CFD traders because of their over-zealous margined trading approach.

Ensure that your margin liability can be afforded comfortably. The open position value will reflect on the availability of total margin. Make sure that you hold on tight to your financial trading all the time to avoid getting caught in downward twist of leverage trading.

Lack of stops
Decision making for placing stop on every CFD position is crucial. It allows the position to get closed automatically, if market moves towards or away from specific level. Traders often neglect to place stop position, due to overconfidence. Veteran traders have the skills but to remain as CFD trader for long, stops are necessary to set and reduce the dramatic impact of incompetent trade predictions.

Misreading trade market
Lack of research can cause a lazy successful investor to make catastrophic predictions on future winning positions. They have had few successful trades because of that they keep spending with a hope to recover losses. It is a natural instinct, which is a fallacy that needs to be controlled, so as to reduce the overall exposure to losses.

Remember, bad things happen. So, avoid throwing money at a losing horse but close the position ASAP. Even though handling CFDs drawbacks of misreading trade market is very painful - do acknowledge that you have misinterpreted the dynamics of trade market and close the position.

Have a bad streak
You have spent weeks researching a position and predicted its outcome but still it was a bad call. Trade market is unpredictable and sometimes the scenario does not work in your favor. Even experienced traders have such bad streaks. Every position made soundly after a thorough research does not mean you will not be the victim of losses. It is true that you learn from mistakes and unsuccessful trades but at times there is nothing you can do to avoid losses.

Ignore a trading plan
Trading plan helps offer a structure and guidelines. It defines your trading activity. Every trading plan is different and it is planned as per the trader’s style. Keep the plan simple and cover the main points like -

Identify the market you are comfortable to trade with
Determine the length of duration to stay in trading position
Recognize the amount of risk you can willingly handle

Stick to markets you are familiar with and learn about the trading hours and conditions that influence.

CP Blogs do not necessarily reflect the views of The Christian Post. Opinions expressed are solely those of the author(s).