It is no secret that many people who trade in the foreign exchange markets do not have a secret formula for successful trading. You should not expect CFD trading secrets to make you an instant millionaire overnight, though.
However, do take note of these few points if you wish to maximize your experience and avoid any of the common pitfalls of CFD investing. A good broker will always offer you good advice and you must respect that advice. Following it is essential. If you do not heed the CFD broker’s advice, then it can be very costly indeed.
There are different kinds of leverage in CFDs, so before you decide to trade, you should have a good idea of which kind suits you best. This way, you will limit your losses and increase your profits too. The simplest form of leverage is ‘no risk’. If you lose the amount of money that you put into the trade then you do not lose anything on the underlying shares. Listed below are some other CFD trading south Africa suggestions and how you can limit your losses:
You can make your CFD trades with one underlying asset – this means that you need to limit your risks of investing in less than strong currencies if you intend to succeed. Most traders limit their trades to just two currency pairs, but trading more, or even three times that number, puts you at greater risk of large losses. These suggestions below should help you as you decide how much leverage to use when trading in the different underlying asset markets.
CFD trading is all about currency pairs, and if you are new to trading, it is best to stick with the same currency pair as your broker – this way, you will be more in tune with the market and will be able to make more effective trades.
In addition, if you only trade in one currency, then you will be in a position to manage your losses more effectively. It is important to note that if you start out trading more than one currency, then you may find it harder to manage your trades, especially if they are volatile.
Once you have begun to trade in CFDs, then you must develop your own ‘piranha’ or ‘centipede’ strategy. These are technical terms that mean ‘head wind’ or the speed with which an asset moves against an underlying asset.
These terms are very important in CFD trading because they indicate how fast prices can change – they can either go up or down, so if your strategy indicates that prices can move up, then it is likely that you will have good profits. However, if your strategy suggests that prices can move down, then you are in a bad position and you may find yourself facing large losses.
To begin trading CFDs, it is best to open a free demo account with a CFD broker. By opening a free demo account, you will be able to make sure that you do not make any costly mistakes, but at the same time, you will not have to risk any of your capital.