Trading CFDs is an excellent way to make profits whether you are a veteran trader or a beginner. It involves putting your money on an asset depending on where you think the price is headed. You buy if you expect it to go up and sell if you think it is going to decline.
If you are just starting out, you may need to take some time to understand the details of CFD trading. There are as many platforms as there are providers and all come with their varied functionalities.
As a result, you will need to:
- Study how CFD trading works
- Create an account
- Figure out a trading Plan
- Find trading opportunities
- Choose a trading platform
- Open and close your first position
Study How CFD Works
First off, you must understand what Contracts for Difference are and how they work. It may also be necessary to find out about other forms of trading in order to understand it better. The best way to understand CFD trading is by taking a course with a reputable academy or provider.
There is also a lot information about this form of trading online. Reading articles from expert sources such as Saxo Markets will give you detailed information about CFD trading.
Create an Account
A beginner trader may be advised to begin with a demo account. This allows you to learn the ropes as you practice trading before getting into the thick of it. It is easy to open an account and it will take you a few steps and very short time to open one.
You are required to fill in some details which will then be verified. Once that is done, you must deposit some funds into the account. From them on, you can top up your account using your credit or debit cards or an online payment service like PayPal.
Create a Trading Plan
Your strategy will be informed by several factors including the following:
- Your commitment and availability
- Your motivation
- Available funds
- Attitude towards risk
- Your preferred markets to trade
- Choice of strategies
Your trading plan will direct your trading activity. Also, it will help you to fine-tune your strategies and guide you into making better decisions when you are under pressure. Moreover, it helps you to determine your expected profit, acceptable loss as well as risk management approaches.
Find Trading Opportunities
There are lots of markets to choose from. However, you cannot simply jump on the first one that comes up. Remember, you must study the prices to determine the direction they are taking before you buy or sell.
Markets include shares, Forex, commodities, cryptocurrencies as well as indices. Your chosen platform should be in a position to help you with is often an unnerving task.
Choose a Trading Platform
There are many platforms to choose from that will help you with your accounts, positions and strategies. They send you customized alerts and help you with trading as well as risk management tools.
Open Your First Position
Everything you have been doing so far has been leading to this moment; your first position. Once you have chosen a market, you are ready to play ball. First of all, decide whether you are going long or short.
Study your market of choice and try to predict the direction the price is taking. Then, monitor all your open positions and close them by choosing the ‘close’ option. If you think the price is spiraling, go short. If it is rising, go long.
You will either make a profit or a loss depending on how your predictions go. These will be calculated by multiplying market movement by your trade’s size.
As you buy and sell, keep in mind the prices. Also, be prepared for your predictions to go either way. Making losses is a part of trading. However, you will make profits too. You could also have a sound case of beginner’s luck and make a profit on your very first try.
The trick is to be patient, using the right tools to manage risk and knowing when to stop losses.