While it may seem like a highly complex process on the surface, CFD brokers break it down into an easy-to-understand model for us regular folks (who are more concerned about making money than anything else) by allowing us to buy and sell foreign exchange under margin conditions. You can go long, short, or even hedge your current portfolio to manage the risk behind your investment.
These points will get you started
Educate yourself about financial markets
Including CFDs and other forms of trading should be your number one priority. It might seem like common sense to some people, but it must be stated because I still run across too many traders who jump into something completely blind and only figure out the good/bad aspects once they either win or lose money.
The internet is a precious resource for this purpose; however, always remember that just because an article or video says it is « the truth » doesn’t mean you should believe everything you read online. Do some research and find out what works best for you through trial and error.
Utilize multiple strategies
The more robust your strategy, the higher the likelihood that you will be successful in the long run. While I agree that sticking to one style of trading has its benefits, sometimes we get unlucky and need to mix things up a bit. Furthermore, some traders thrive on specific market conditions while others cannot make money unless there’s blood on the streets (aka volatile markets).
With this information in mind, it makes perfect sense to implement additional strategies into our playbooks; after all, we never want to be put in a position where we can’t make money simply because our trading style does not fit the type of market that is currently available.
Build strong discipline
Probably one of (if not THE) most important aspects of successful trading, discipline is often complex to master but becomes increasingly more accessible with time. I struggled with this for months when I first started; you get caught up in trades, start hating yourself for taking certain positions, and begin second-guessing your overall strategy due to lack of confidence.
While this feeling will likely never go away, you should always remind yourself that success requires sacrifice. Knowing when to take your losses will significantly improve your chances of winning.
It cannot be stressed enough, the importance of diversification, especially for novice traders. However, even for those who have been around the block several times, this is still something that you must pay attention to regularly. If you decide to invest in multiple currency pairs, make sure you are familiar with all of them (even those outside of the majors) before placing any trades.
The more information you have about any given currency pair or its technical indicators will likely help you determine which strategies work best at different times throughout the development of that market.
Anyone who has ever told you that all pairs trend (aka: move in one general direction) at any point in time probably does not trade forex for a living; while trends do exist and work very well, highs, lows and inside bars become increasingly more common when markets are experiencing choppy conditions. In other words, if your strategy is primarily based on finding trending markets, then perhaps you should focus on another pair until the market « catches a move ».
Ultimately, suppose you have been struggling to make consistent profits from trading or losing money over a prolonged period. In that case, it might be to your benefit to utilize CFDs to help develop a winning strategy. Learning how to use CFDs can open up a whole new world of possibilities because you will not need to risk any of your funds to gain exposure to specific markets.
With so many opportunities available on a 24/5 basis, there is no reason why traders cannot learn how to use CFDs properly and develop an effective strategy that can help them earn consistent profits.