CFD Trading Tips

Good one from http://www.learncfds.com



LearnCFDs.com is first and foremost about real trading ideas and strategies that help you become a better trader over time (not overnight). There are no get rich quick tips here so if you are looking for the next Holy Grail then you have come to the wrong place.
If you are looking to build a solid trading foundation that can weather all market conditions then you are in the right place. No hype. Just simple and effective trading strategies to build a steady, rising equity curve with minimal drawdowns.
1. Preserve Precious Capital – PPC
This fantastic money management/capital preservation idea was unashamedly taken from Marcel Link's brilliant trading book titled "High Probability Trading". Marcel goes on to explain in his book how in his early days a fellow trader saw him overtrading and suggested Marcel concentrate on preserving precious capital. He said “Forget about making money; just try as hard as possible not to lose any. Every dollar you have is precious, and fight as hard as possible to keep it in your pocket and out of someone else's”.
What is the point of having the best CFD trading or share trading system in the world if you have lost all your money? Therefore your goal will always be to keep your losses small.
2. Ensure you have an edge
It goes without saying that you need a positive expectancy trading system or an edge in the markets. There is a saying at poker tables along the lines of “if you look around the table and you can't see who the sucker is, its you!” In trading there are professionals who are dedicated to stripping money off you and you have to be diligent, disciplined and confident about your edge in the markets. Work hard and stay focused on keeping your edge.
3. Control your CFD leverage
CFD leverage is so powerful when things are going well and it can be so easy just to keep increasing position sizes as you are winning but the inevitable loss is always lurking around the corner. One lady managed to turn $50,000 into $750,000 in 10 months during the 2004 bull market, only to give half of that back in 1 bad week, March 2005. Ouch.
Start small with your CFD leverage and keep your total exposure low relative to your capital base. If you are starting out trade from zero leverage up to a maximum of 3 times your account size.
4. Use CFD stops religiously
Stop losses make sense. They help minimise your loss which helps you with CFD Tip number 1 – preserve precious capital. Every trade your enter should have a clearly defined CFD stop assigned to it and ideally you should have identified that CFD stop outside of live trading.
You see it's very easy to get emotionally charged when your position is falling rapidly and more than possible to give yourself reasons as to why your stock is going to miraculously head in your direction. It probably isn't and HOPE is not going to help. Define a CFD Stop outside of market hours and stick to it.


5. Establish clearly defined, realistic Trading Goals

“All I want to do is make a measly $1,000 a week trading with my $10,000. That's achievable isn't it?”
Alongside your 1st rule, preserving precious capital, your 1st major goal when starting out in CFDs is to keep your account in tact and stay in the game for the 1st year. Survival is paramount if you are going to make a decent living out of CFD trading. A mentor of mine, Jim Rohn, used to say “If you don't know where you are going, well you will get there” See the truth is, you will end up somewhere but is that really where you want to be? Wouldn't it make sense to attempt to plot a path towards a steady and successful CFD trading career?
Simple Goal writing procedure
Identify what it is you want
Focus on it daily
Kill all distractions that move you away from your goal
Gently bring yourself back to point 2
6. Keep a CFD trading or Share trading journal
A CFD trading journal allows you to record the trades you make just like you would with a diary entry on your life. Your CFD trading journal enables you to gain clarity on the reasons why you entered or exited a trade and will form the most powerful learning experience you will ever have in the CFD trading field.
Hindsight is the most powerful educator and when you look back on your thoughts and strategies, certain patterns will emerge – the good, the bad and the ugly. Take note of these and map a path to recovery.
What to record in your CFD trading journal:
What you bought or sold, profit or loss
Time trade was done
Reasons behind the trade – Technical, fundamental, tip or dart board
Include a chart showing proposed entry, stop and profit target
7. Have a well defined trading plan
Are you a discretionary trader or a mechanical system trader? Either way you need to establish a sensible trading plan that identifies the following:
Entry Strategy – Test hundreds of entry set ups. Prove to yourself that it works
Money management strategy – How much of your capital to place on each trade
Risk Management strategy – How much risk to allocate to each trade based on money management rule and stop loss size
In profit stop loss – You need to identify a Stop Loss when in profit. For example a trailing stop loss
Record keeping strategy – Keep your trading statistics up to date and a daily CFD trading journal
8. Be Disciplined
Now that you have created your CFD trading plan, be disciplined to stick to it. Consider the countless hours and sleepless nights that went into researching your trading methodologies. The testing, re-jigging then testing and testing again. Trust what you have done is right and trust that you have a tested edge in the markets. The rest will take care of itself.
9. Scale in and out of CFD trades
Most successful traders trading accounts are neutral for most of the year. But there is usually a window in any 12 month period of 2-4 months where profits are unbelievable. The thing is you don't know when that is going to be so you need to keep your capital in tact (PPC) during those lean months. Then when the market turns its time to start adding aggressively to winning positions. All the greatest and most successful traders in our time have learnt this powerful strategy.
10. Keep a positive mindset
Don't treat trading like it's life or death. Have some fun (Funny Trading Videos) and take your time to learn the key foundations to successful share and CFD trading. Along the way keep a positive mindset and a positive attitude and by staying patient the 'purple patch of profits' will happen.