You have probably come across the typical traders’ worry, “Is trading CFDs a good idea?” Some traders will advise you to keep off forex CFD trading because itis a gamble. And could lead to a 70% to 80% loss to your trading account.
That begs the question: if forex CFDs trading is not a viable trading venture, why is there a rise in its demand? The most straightforward answer is that trading forex CFDs is a good idea. It presents you with trading flexibility, a two-way earning route, and lets you earn more with less.
However, it would be helpful to watch out for the mistakes that blow some traders’ accounts. That is the motivation behind this article. It explains the tricks to boost your forex CFD winnings. Let us get started by defining forex CFDs.
What Is a Forex CFD?
CFDs in forex entail going long or short on currency pairs through leverage. By going long on a currency pair, you predict that the base currency will rise in value.
Assume you trade GBP/USD. The previous day’s closing price is 1.3700. The broker lets you trade a lot (of value $100 000) by depositing $1000.
The day’s closing price {(1.3730 – 1.3700) * 100 000}is 1.3730. Your profit is $300. Similarly, your loss becomes $300 if you predict the prices to fall yet they rise.
Importance of Forex CFD Trading
Earn in Two Ways
Unlike a typical forex market, forex CFDs let you earn during both the uptrend and downtrend. The prices could be falling, and your forecast becomes true. Likewise, you win trades if you predict currency pair prices to hike, and they do so.
Utilize the Loan
The best part about forex CFD trading is letting you trade with a lot of value higher than your capability. Let us flashback on the above example of trading example.
You traded on a lot of value of $100 000 with a deposit of $1000. Technically, the broker loans you $100 for every $1 you deposit. With best risk management practices, you can propel the income through correct forecasts.
Enjoy Trading Flexibility
You can boost your forex earnings through the reduced trading costs. Compared to spot forex trading, you incur less spread, transaction, deposit, and withdrawal costs. Forex CFD trading flexibility results from being able to operate 24/7. However, it would help to avoid swap charges that result from overnight trading.
4 Rules for Successful Forex CFD Trading
Now that you know why forex CFD is a good idea, it would be best to identify four main tricks to avoid making losses. Understand the market. Automate. Do not be hard on yourself. Lastly, stick to a trading strategy. Here is more explanation.
1. Understand the Market
The most critical step to winning more than 83% of your trades is understanding the forces moving the market. You should find out the most crucial technical indicators that give the most accurate signals.
For example, after understanding economic, social, and political effects on forex, you should dive into four main technical indicators. These are the trend, volume, momentum, and volatility indicators. The recommended way to building a solid knowledge of the forex CFD market is to start trading through a demo account.
2. Automate
Advancement in trading technology has made it effortless to automate critical account activities, such as opening/closing positions, initiating stop-loss, and take profit orders. The collaborative robots minimize extreme losses while maintaining profit levels.
3. Be Gentle with Yourself
The most typical mistake that could prevent you from succeeding in forex CFD trading is being over-optimistic. You can then give up easily after a few losses. Successful forex traders do not become hard on themselves when they lose trades. Instead, they bounce back to currency trading with better plans and win trades.
4. Stick to a Strategy
Another way to control your emotions is to know why, when, and how to trade. For instance, you can stick to day trading using a specific lot size.
Conclusion
Forex CFD trading is a good idea if you can stick to a strategy, automate, and understand the market. Most importantly, you can give it a try without giving up when you inc
