Some experiences are harrowing and expensive. Many investors who do not hedge the risk when trading CFDs lose capital unnecessarily. Risk and capital management are essential to prevent this from happening. Even traders without much CFD trading experience can use contracts for Difference to their advantage with a willingness to learn and a few tips. We have summarized the options available and the mistakes that you should avoid. Save yourself unnecessary losses and negative trading experiences, and act wisely!
Entry into CFD trading ideally with a demo account
Risk and capital management essential for CFD trading
Traders shouldn’t immediately hit maximum leverage of 1:30
Support with CFD trading by a community with social trading possible
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CFD Service – 73% lose money
CFD trading experiences – this makes it easier to get started
Many traders start trading with a broker and give up after a short time. Experience shows that more than 50 percent of the trading accounts opened are closed again after a few months or are no longer actively used. The reason is that although investors want to gain experience in CFD trading, they quickly throw the gun in the towel again if the desired success does not materialize or if they have lost capital through their trading activities. There are several ways to prevent this from happening. Only well-prepared investors will have long-term success in trading.
CFD trading experiences
How the start with CFD trading can be as successful as possible depends on the respective trader. How much experience is there already? Prospective traders who have never had anything to do with contracts for Difference or who were active with their capital should first start with a demo account to gain experience with CFD trading without risk. The demo account is also suitable for investors who have already contacted contracts for Difference and have even gained trading experience. The demo trading allows you to test strategies and improve trading approaches without any risk.
Set a Realistic goal in CFD trading
One reason why many investors fail when trading CFDs is setting unrealistic goals. Contracts for Difference offer exceptionally high-profit opportunities due to their leverage, and it increases risk. However, many traders ignore the risk and focus only on the profits and often risk too much. Emotions and euphoria play a significant role because those who make a profit can fall into an actual intoxication and want to expand these profits further. Some newcomers open additional positions (often too quickly). In the worst case, the emotionality ensures that investors do not invest based on the price analysis but are guided by the success of the previous trades.
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CFD Service – 73% lose money
The objective is the be-all and end-all
We recommend developing a trading plan before traders gain experience with CFD trading and using a live account. This also realistically defines the investment objective. To determine the trading plan, the following factors, among others, are decisive:
Experience with CFD trading
Contracts for Difference are among the high-risk derivatives, particularly suitable for inherently more risk-tolerant investors. However, the capital employed is also decisive because with a deposit of 10 euros, for example, traders cannot become millionaires, certainly not within a few weeks or months. To have long-term trading success, diligence, willingness to learn, and perseverance are required.
This is how traders can make a plan.
It would help if you always fixed a trading plan. For investors, this means that they have their trading ideas in mind and put them on paper. Part of the trading plan is also to set the maximum amount of capital. The following rule applies here: Never use the entire balance on the trading account. At best, investors use smaller amounts of around 2 percent because they can also get over positions that run against the trader. The aim is to limit the risk and take the profits – but not at any cost.
Do not open any unplanned positions.
The trading plan makes it easier for investors to organize their day trading the Contracts for Difference. In this way, it can be determined when investors become active. Some traders prefer to trade Monday through Friday; others prefer to trade only selected days of the week (because then they have the time to do so).
In principle, You should never open a position without a plan. This means that a course analysis should be carried out before each position opening to weigh the opportunities and risks and find the optimal time for entry and exit. Based on experience, we advise against position trading based on a single news message because traders then often react (too) emotionally. In addition, the message can turn out to be a ruse in the end, and, in the worst case, the position may run against the trader.