In recent years, Contracts for Difference have gained enormous popularity among traders all over the world, and the interest is still growing. However, in choosing CFDs, many newbies still don’t realise exactly what they are doing and continue making some crucial mistakes.
Let’s see, how we can close the knowledge gap and learn some major CFD trading rules on how to do it successfully, or at least, what to start with.
Rule #1. Understand what a CFD is
I’m afraid to sound like a Captain Obvious, but in order to start trading, like in any other business, you should exactly understand WHAT you’re trading and HOW to do it right.
A CFD trading is that you don’t actually buy or sell the underlying asset (a share, commodity, index, or cryptocurrency)., or a CFD, denotes an agreement between a trader and a broker to trade on the difference, speculating on the instrument’s price fluctuations. The main difference of
To cut a long story short, watch our “What is a CFD” video and use it as a short guide to start:
Rule #2. Control your CFD leverage
One of the major advantages of trading CFDs is that you don’t need to pay the full cost of a chosen asset. You can trade on margin, which means your broker leverages your capital for you to trade a particular instrument. In this case you have to pay just a certain percentage (or margin) of its full value.
Traders may prefer to enter trades that may at least double their money. Trading CFDs makes the situation even more attractive, providing much better opportunities and offering leverage.
Sounds too good to be true? While the situation turns in your favour, it can work out well for profits. However, greater leverage presupposes greater risks. So, you’d better start small with your CFD leverage and keep your total exposure relatively low according to your capital base.
Rule #3. Religiously use CFD stops
Stop losses. An absolute must-have, in our case, a must-put.
I’m sure you’ve heard that