Home Business Insights & Advice What are the essentials needed to start trading CFDs successfully?

What are the essentials needed to start trading CFDs successfully?

by John Saunders
3rd Sep 21 11:18 am

Trading on the world’s financial markets is something that is becoming increasingly popular around the UK. As you would expect, London is a real hotspot for trading because of its status as the UK’s financial hub and English capital city. However, trading is not just focused on professional traders at investment banks anymore. Many people in the UK who are not from the professional banking world are starting to trade assets from home.

One approach which has grown in popularity is CFD trading. Standing for ‘Contract for Difference’, CFDs mean agreeing on a contract with a broker when placing a trade. This is different from other types of trading where the trader makes the deal directly with the market. CFD trading is also popular because it allows traders to use leverage, has no fixed dates for when agreements end and gives access to multiple markets in various assets.

It is important to know the essentials when starting as a CFD trader. But what are they?

Get your set-up right

The first essential you will need is all the relevant hardware and kit. The move to online trading in the last few decades makes a fast and reliable internet connection a must. A desktop machine can be used, or you could use a laptop instead if you prefer. Modern mobile apps mean trading via a smartphone (Apple’s powerful iPhone 12 is a popular choice here) is also possible.

Once you have your device and an internet connection, you also need to have some starting capital to trade CFDs. Successful CFD trading will require a dedicated space in which to work. It is unlikely that you will be able to focus when trading on the sofa with the TV blaring! For this reason, many people set up a desk and chair to use somewhere quiet in their home.

Find a reputable broker

It is vital to find a reputable broker you can trust. Comparing CFD brokers is crucial because it enables you to make the right choice from the many brokers around. Many people new to this sector turn to AskTraders for help. This trustworthy site is dedicated to educating people about trading and carries some handy comparisons of CFD brokers to consider.

But why is the broker you trade with so important? To begin with, it is crucial because creating an account with your chosen broker involves trusting them with your personal details and hard-earned cash. In addition, all brokers will offer different assets to trade, which can be important to many traders. For example, reports which saw DOGE among the top-rated crypto assets to trade in May 2021 might see you eager to invest – that is only possible with a CFD broker that carries this asset.

Settle on a trading strategy

The next critical thing to get in order is your trading strategy. It is not a great idea to trade randomly and without any kind of set plan in place. By settling on one strategy you will use to trade, you can get to know it and make it work for you. It will also give extra confidence that you know what you are doing and are trading with a professional mindset. The internet is a great place to find strategies to use, but many people also turn to hard copy books for inspiration.

Be careful of emotions and leverage

We have covered the essentials which any new CFD trader needs – but what about a few things to be wary of? One of the best tips for new traders is being careful of leverage. Leverage can be a plus point with CFDs because it helps you place bigger trades without actually having all the money. It can quickly turn against you, though, as bigger trades mean more significant losses if you get it wrong. You should also be careful of your emotions and avoid letting them influence your trading decisions. It can easily see you make bad calls or even be too nervous about taking an opportunity when it presents itself.

CFD trading for beginners – get the basics right

As with any new endeavour, it does come down to getting the basics right for new traders. Make sure you understand how it works, then get your set-up right, pick a secure broker and settle on a good, proven strategy to learn. With this in place and some hard work, you should be well on the way to making it as a CFD trader.

 

The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.

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