CFD Trade: Trading CFDs

If you want to trade CFDs or contracts for difference, then you’ve got to keep a few things in mind.


1. Are you trading a system?

Whether it is discretionary or mechanical or a mixture of the 2, meaning there are rules, but some rules require a judgement (eg is the share or stock in congestion or overextended) but which cannot be programmed into a computer, a system define entries, exits, stop loss orders and more.

2. Is your money management sound?

With each trade, how much of your float are you risking in the market? And how many positions can you be in at the same time? Money management, combined with the old adage of letting your profits run and cutting your losses short, will help you survive and thrive. No one can tell you exactly how much to use as a cash float and how much to risk per trade exactly, as each individual is different, but you do need to know your money management rules before you trade CFDs or any other trading instrument.

3. Is what you’re trading sufficiently liquid?

This is important especially for shorter term traders, if you want to get into and out of a trade without slippage or with minimal slippage. Most people trade stock or share CFDs or indices or other instruments which are liquid enough, so that they can get in and out with less slippage and hopefully, depending on the CFD provider or broker less spread (the difference between the ask and bid prices).

There are other tips and rules of course, and the first place to start is often with a good CFD education in your area to learn how to trade CFDs. Remember that trading, whether it is forex, CFDs, stocks and shares, indices or commodities, that the aim of the game when starting is to make gains and to be sensible and to be aware of the risks as CFDs are traded on margin, and to place trades correctly on your CFD trading platform. Remember that trading in any financial markets involves risk of financial loss as well as gain and to see a qualified financial advisor for advice.

And as you may know, a good CFD provider can help in that they will provide instruments you need, a good CFD trading platform and demo account to practice on, good commission rates and adequate margin/leverage, overnight interest or financing charge, and staff support

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One Response to CFD Trade: Trading CFDs

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