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Golden Rules to CFD Trading

Golden Rules to CFD Trading

1 Understanding the numbers game

Understanding the numbers game, that is risk per trade such as 1% of capital per trade for risk. Risk reward ratio, such as risking 1% to gain 3% is important, look for trades that can trend. Be capitalised, that is have enough money so you only have to risk 1% per trade, the less you have then more you will risk and this is a trap for young players. Most new traders work out the money management last after they have lost a few accounts, but it’s the first element that you need to fully understand, this is the only point professional traders agree on.

2 Choose a trading method that captures the trend

Choose a trading method that captures the trend, as the money is in the trend, not little profits. A little food for thought is out of 10 trades, say you get 5 trades right and 5 trades wrong, if you risking 1% per trade, that’s a 5% loss, the other 5 trades are winners, however there will be a few break evens or making just a little, but if you have a trading method that lets profits run, then one or two trade can run nicely, so out of 10 trades 2 can have a good profit, so its important to keep the risk small and let the profits run.

3 Choose a trading style that is more mechanical than free style

Choose a trading style that is more mechanical than free style, as this will help remove the emotional element. One of the biggest problems is sticking to the trading rules of the trading system/plan trading can be very emotional and you will be constantly tested, stick to the rules.
4 Choose trades carefully (obvious we know, but…), time your time and look for the optimal trade setup, keep a track record of the setups that make you money and keep refining that set up.

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