Getting into CFD trading is easy. Just sign up with any CFD broker and jump right into the world of CFD trading. However, to succeed as a trader, it requires a different set of persona, mental discipline, intellect and a gumption of luck.
Statistically, not more than 10% of CFD traders succeed in making a decent living off trading. There are many reasons why CFD trading would fail miserably for the average person. Here are three reasons that I can think of, derived from my experience as a trader and investor for the past 20 years.
I. Blind Hope
Hope is the enemy of objectivity. One of the most common mistake a rookie can make is to hope that the CFD instrument would bounce back after its relentless downward trajectory, or to hope the instrument would continue its unbridled ascent. A seasoned CFD trader does not hope. Instead, he relies on his internal metrics to determine whether to cut loss or take profit.
CFD trading is like a multi-year war. Losing a battle does not mean that you have lost the war and vice versa. So, lose that ego of yours.
II. Lack of Research
Sometimes, it just bewilders me when a rookie jumped right into a CFD instrument just because his friend told him so. Uhh… as friendly as friends are, when it comes to money, I would still prefer to be a bit more astute. After all, you do not want to be the last man to hold the ball. Before buying any CFD, you must always do research on it. Study the annual reports, dig up the latest news (or shits) about the company, do as much due diligence as you can. The goal is that you would be able to explain why this CFD instrument that you are buying is worth it. When it comes to the domain of CFD trading, diligence usually wins.
III. Not Knowing When To Buy
So, you have identified a CFD instrument, researched a ton on it, and now you would like to pull the trigger. So, the next equally important question is – when should you enter? This is where many CFD traders flop. Seasoned CFD traders often rely on quantitative tools like a CFD trading bot to help them enter positions. For new CFD traders who are interested in dabbling in automated CFD trading, they can check out CFDHero.
IV. Bad Risk Management
A new CFD trader most often does not manage his or her risk well. This often results in the positions closed prematurely, resulting in losses. By having an eagle eyed approach to the CFD margin’s level, a CFD trader can ensure that his/her positions are in a healthy state.
In essence, it takes a long time to master the psyche of a CFD trader (less hope, more objectivity. Less emotion, more clinical) but if one uses a CFD trading bot to help him trade the CFD market, the journey to be a successful CFD trader should be accelerated.