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CFD Trading Tips

If you’re attempting to become a successful CFD trader, taking the time to learn the key foundations of successful CFD trading is an essential step. This involves creating a set of trading rules, maintaining the discipline to stick to your strategy, sticking with a positive mindset at the same time as possessing awareness of your current emotional state.

Here we outline seven tips to take into account;

  • 01

    Create Clear and Realistic Trading Goals

    Once you have identified your long term trading goals, you can make an effort to focus on what you would like to achieve each day. This will also help you to eliminate distractions that could move you away from your targets.

    Spend time planning your entry points, exit points and objectives. In addition, testing, evaluating, adapting and re-testing may prove useful when it comes the search for an optimal strategy. A well-defined strategy created before entering a trade may also help you avoid potentially bad trading decisions based on emotional reactions to sudden market movements.

  • 02

    Be Disciplined

    Once you have created your CFD trading strategy, be disciplined and stick to it whilst you have open trades. This will help you to reach decisions based on logic rather than emotion. Although making trading decisions based on hunches may occasionally result in profit, successful outcomes will rarely be consistent. It is important once you have started trading to avoid making changes to your planned strategy mid-way through trades.

  • 03

    Keep a Trading Diary

    A trading diary is particularly useful in identifying your strengths and weaknesses as a trader. Keeping a diary will help you to identify patterns that helped you achieve points of success or that contributed towards failing trades.

    What to record in a CFD trading journal:
    - The asset you bought or sold
    - Your reasons for entering the trade
    - The date and time of the trade
    - Your profit or loss

  • 04

    Use Leverage With Caution

    The leverage offered with CFDs can greatly magnify profits on winning positions and it can therefore appeal to traders. However, leverage can also amplify losses when markets do not move in a trader’s favour. Be cautious and use leverage sparingly by starting small and keeping your total risk low relative to your available capital – so that your trading account won’t be wiped out by a single unsuccessful trade.

  • 05

    Familiarise Yourself with Trading Stops

    Stop losses are powerful tools that can help minimize your trading losses. For example, it can be common for traders in a deteriorating open position to try to rationalise why their asset will miraculously head for a turn-around. Stop losses can prevent traders from making potentially drastic mistakes by sticking to losing trades that could lead to a quick and complete account wipe-out. ETX offers a few different types of stops, not all of which are guaranteed; for more information, please look at (insert page link here).

  • 06

    Keep Up with News Events and Market Trends

    It can be useful to keep tabs on global financial and geopolitical news; such events can often herald significant market movements.

  • 07

    Trading and Emotions

    No trader has a 100% winning strategy. Be prepared to accept small losses in your quest for larger profits. Successful traders can often experience more losing than winning trades, but their losses can be much smaller than their overall gains. However, traders should fight the urge to trade blindly in the event of losses in the hope that a situation will turn itself around; trading with heightened emotions can lead to one making errors which otherwise could have been avoided.

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