How to become a successful CFD trader

Ensure you have a good understanding

There are loads of stories out there of CFD traders who hit the jackpot, made that ultra-successful trade and made themselves a lot of money.  But for the most case, there are many more traders who make a good living from their trades.  These are the people you want to emulate because their success is based on good strategy and practices.

Education and practice

Before you place a single trade, it is important to feel like you have a good understanding of how CFD trading works.  Contract for difference is a lot easier to start with than other markets because you don’t need that huge capital as for, say, buying shares or Forex trading.  It is a leveraged product, so you only need a percent of the value of the asset.

But, easy to start doesn’t mean easy altogether.  There’s a lot of learning to do with CFD trading and this is the key to your success.  All successful traders (including that one that hit the lucky jackpot) have all done extensive reading, educating and practising of their trades before they used real money.  Demo accounts can be ideal for this, a place to practice your trades without trading real money.

Start small and don’t get too excited

One of the main reasons that traders drop out of CFD trading is that they get too excited about a trade, too ambitious in what they are doing, and they blow through their capital, leaving them with nothing to trade with.  While starting small and keeping trades cautious may not be the most attractive approach, it is certainly the one most likely to see you keep trading and making a profit.

Successful trading is definitely about balance more than risk taking.  Sure, every trade is something of a risk and there are times when you can exceed the rule of starting small and being cautious, but even that should be done from a view of understanding what you are doing.  Keep it logical and don’t use emotion in your trades.

Diversify as you grow

When you start, the advice is simple – stick to one market, learn it comprehensively and make a healthy return.  But, as you grow, gain more experience and have a firm strategy behind you that works, and you can diversify.  It is important across different markets because there is always the spectre of a market collapse.

By involving yourself in different markets, you have the best chance of making profits but also insulate yourself somewhat if there is a sudden downturn in one market you trade.

Learn different strategies

Like diversifying, learning different strategies is something you will do as you build up your experience.  There are lots of different approaches to CFD trading that can yield good results and the key is to learn which ones work for you and when to employ them.

News playing is one example and a simple one to start with – watch the news and use what you learn in your trades.  Let’s say a major oil company has a big oil spill somewhere in the world – you read the news and know that their stocks are going to fall.  You can use this insight in your CFD trading on that asset or associated ones.

Scalping is a very busy strategy that involves identifying small profit opportunities in the bid, and ask price, of a company’s stock.  By exploiting those gaps, you can make lots of small profits, but you need to be very nimble – there can be as many as 20+ trades a day for this strategy.

Whatever approach you take, market you trade, or asset you favour, Jones Mutual has the information to help.  Our safe and secure platform is the perfect place for your trades and allows you to grow in to a successful CFD trader.