The CFD trading profession is often considered a potentially life-changing one. Some of the traders are making a handsome living, but others are getting a poor result. For this failure, we cannot blame the platform; rather, we should start working hard to educate ourselves properly. Without having sound knowledge about this industry no one can succeed as a full-time trader.
Mistakes are inevitable in trading but retail traders should take cautious steps to avoid major mistakes. Though there are many ways to avoid big blunders, we are going to highlight the most important techniques you can use to learn to trade like a pro trader.
Using the practice trading account
Being a new trader, you can easily learn the art of trading by using the practice account. While using the demo account, traders don’t have to pay money to execute their trades. The platform will provide you with the fake currencies with which you can easily execute the trades. The good thing about this is that one may sharpen his trading skill using this opportunity. When a beginner does not have to take a risk, they can easily apply all their action plans which are important to execute trades well.
Beginners are sometimes very reluctant to use the demo account and do not understand the value it. A trader must be careful of the utilization of the demo account as it helps you to work out the true potential of the CFD trading in practice trading.
Managing your risk exposure
Without having a proper risk management system, executing trades will be fruitless. An investor must gauge the risk before buying any financial instruments. Generally, the ideal ratio of risk to management is 1:3, which means that an investor may take the risk of $1 to achieve a $3 profit. Taking the risk more than that may make his trade vulnerable to potential loss in a sudden downtrend.
Every trader must be acquainted with the proper risk management system to save themselves from the volatility of the market. Forex is a highly volatile marketplace, and no one knows about the future of the market. Predicting direction of the price accurately is almost impossible, and a trader must be conscious of the effective risk management system, which may help him to minimize the losses. Read more about CFD trading at Saxo and develop your risk management skills. This will help you to make better decisions without taking too much risk in your trades.
Not using protective stops
Newbies do not take the help of the stop loss point of the Forex chart, which could save their trading accounts from disaster in a sudden bearish market. An investor must set the stop loss at a certain point which will be below the moving average in a considerate distance. When the stop-loss point is touched in a bear market, it will save an investor’s account from taking more losses by closing the trade immediately.
Not having an exit point
Due to greed, most beginners do not utilize this technical option which could work as an automation tool and would help you save time. Every trader must guess what they can realistically achieve based on their investment, and should set a take profit point accordingly.
You must be careful here too as keeping the point too far distant from the moving average may mean you take a double loss as you are taking a huge amount of lot. Experts set the point at a considerate level which solves this dilemma to a great extent.
In conclusion, it can be guessed that not these are not the only mistakes which are responsible for making the loss in the trading sector. There are other variables too, such as lack of fundamental and technical analysis may lead to big mistakes being committed by newbies. So, before starting your trading career, do some in-depth research.