Are you prepared to begin trading CFDs?
If you want to start trading contracts for difference (CFDs), it's vital you do all the groundwork first so you know you're ready.
So how do you know if you're ready to start trading CFDs?
Read on to find out…
Do you understand the risks of trading CFDs?
is much higher risk than investing in shares. Due to the gearing aspect you gain from trading on margin, you can lose more than you initially put into a trade.
If this sounds like too much risk, perhaps trading CFDs isn’t for you. You have to be comfortable taking on this risk.
Stop losses can limit your losses, but occasionally a share price will gap through your stop loss. This means your losses could be more than you thought they would be.
Do you have the time to devote to trading CFDs?
When you invest in shares, once you’ve done your initial research and invested, you just need to monitor them every now and then.
When you trade CFDs, you need to keep an eye on your open trades. You need to check that trades are panning out as your thought they would.
This requires checking what’s going on with your open trades at least once a day.
It’s a good idea to have a system in place which warns you when your share price moves by a certain amount. Your trading company or stock broker may be able to provide this.
Can you trade CFDs like a robot?
A successful trader operates like a robot, sticking to his strategy with no deviation. It all comes down to discipline. And this is a trait you must possess for trading CFDs.
You must know when to cut your losses and not allow yourself to get emotionally involved with a trade. You need to be ruthless. Your money is at stake after all.
So there you have it. How to know if you’re prepared to begin trading CFDs.
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