Your Guide to Successful CFD Trading

dollar2While CFD trading has many similarities to forex, online forex and CFD trading do vary greatly in the sense that forex focuses on trading currency, while CFD trading on the other hand promotes the trading of commodities – as well as currency. Also, most people that profit from Forex trading do so because of major changes in the value of a certain form of currency. CFD on the other hand is more so influenced by supply and demand than Forex, and the most significant changes in the currency market are based on global events or the shifting of major corporations. CFD trading also enables the trading of currencies, as well as treasuries, company shares, and entices.

How Can I Make a Profit with CFD Trading?

CFD trading is unique and flexible in that you can invest a desired amount of percentage into a stock, and whether or not the value of the stock rises or falls will dictate whether you lose or make money. It’s important to understand that this type of trading can not only yield the greatest, profitable results, but equally can yield the greatest losses too. Responsibly trading and profiting from this method means you’ll be able to buy and maintain stocks for a cheaper cost, and as their value rises it is at that point in which you make your money.

Tips for Maximizing CFD Trading

  • Diversify your trading portfolio – Many traders make the mistake of thinking that multiple investments across the same stock of interest, such as crude oil for example, adds diversification to their portfolio. However, this is just simply not the case. Consider this: if one crude oil corporation feels a negative downward trend, then it’s likely the others will too.
  • Learn and apply Technical Analysis and Fundamental Analysis techniques together – While fundamental analysis might support you in making a profitable trade decision, it’s the technical analysis that will make the difference in profits. This involves knowing when and how much to invest or trade given the current market value of a commodity.
  • Understand the consequences of an emotional trader – While some individuals can profit from a “hunch”, most traders who attempt to do so without using logic incur much greater losses in the long-run and are only increasing the reality that they are purely gambling with their capital.
  • Learn when to walk away – It’s a very responsible decision to “walk away”, cutting your profits or losses, and reinvesting your money later on. Allowing your capital to continue to “run” after you’ve made profits or observed major fluctuations in a commodity can just as easily take you back to where you started, or worse, cause you to “go under” the capital you originally started with.
  • Make an effort to limit your exposure to one specific commodity or trade – A good rule of thumb is 2-5% of your capital per trade investment and commodity. Any more than this leaves you with the possibility of suffering extremely big losses – or gains – all at once. This is a very risky, and in most cases unprofitable, approach to CFD trading.

CFD trading can be a good option, especially if you prefer to trade with actual commodities. Though do make sure you understand the basics before jumping in.

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