If you are trying to learn how to build a solid foundation on trading, then you have come to the right place. Developing a solid foundation on your knowledge on CFDs will go a long way because it will be what you would have to rely on to weather about almost every market condition. This is not hyped up, but rather simple and proven effective trading strategies.
We guarantee you that if you follow the 10 tips we will list down below, you will be able to build a steady rising equity curve that will have minimal drawdowns.
1. PPC or Preserve Precious Capital
This fantastic capital preservation or money management idea was actually taken from a brilliantly-written trading book, High Probability Trading by Marcel Link. The author, Link, explained how one of his fellow traders advised him to concentrate on managing and preserving precious capital, since he saw him overtrading.
The guy said, “Forget about gaining more money and just try as much as you can not to lose what you already have.” The same guy went on saying that every dollar that you have right at this moment is precious and you should fight the best that you can in order to keep it inside your wallet and not on someone else’s.
When you actually think about it, you would realize that it actually makes sense because what would be the point in taking part on the best share trading or CFD trading system of all time if you have somehow managed to lose all your money? It is, therefore, your goal to make sure that you always keep your losses at the minimum.
2. Ensure that you have an advantage
In the trading world, you would come across a lot of professionals that are dedicated solely on stripping you off of your money. What you can do to to stay alive in the scene is to be disciplined, diligent and confident on your edge or advantage in the markets. You must work very hard and focus on maintaining your edge.
3. Take control of your leverage
A leverage on CFD is powerful if things are doing good and it would be very easy for you to keep on heightening up your position size because you are still winning. However, this is actually a bad idea. You need to remind yourself that the inevitable loss would just be lurking somewhere in the corner and it is waiting to bite you. There is actually a woman who turned $50k into an astounding $750k in just ten months. This was during the bull market of 2004. A few months later, she lost more than half of it in a span of one week. Ouch.
4. Use stops religiously
Stop losses are very important. They are the ones that will help you minimize your loss. For every trade you enter, you should clearly define your CFD stop. It is also ideal to identify the CFD stop before you entire the live trade.
5. Establish realistic trading goals
Your first major goal as you start trading CFDs out is to make sure that your account is still alive and in the game after 365 days. Survival is essential if you want to make a living out of trading.
6. Keep a share trading journal
7. Develop a well-defined trading plan
Figure out whether you are a mechanical system or discretionary trader. Either way, you still need to make a trading plan that would identify your entry strategy and your risk management strategy.
8. Be disciplined
Now that you have identified a sensible trading plan, the next thing you need to do is to stick to it and this will obviously entail self-discipline!
9. Do not trade all year
There is only two to four months in a year wherein profits would go to the roof. Successful traders would scale in and out and would remain neutral for the rest of the year if it’s out of season.
10. Maintain a positive mindset
CMC Markets have a trading platform that offers traders tight spreads and very low margins. Have fun while you run through their wide range of CFD products and enjoy every step of the way. Take time in learning the key foundations of CFD trading and you will be well on your way in earning those bucks.