The Kickass Entrepreneur
  • About
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Book
  • Courses
  • Podcast
  • Resources
  • Contact
The Kickass Entrepreneur
Subscribe
The Kickass Entrepreneur
  • About
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Book
  • Courses
  • Podcast
  • Resources
  • Contact
  • Financial and Investment Calculators and Economic Data

Title: 5 Things You May Be Doing Wrong in CFD Trading

  • April 18, 2022
  • 344 views
  • 5 minute read
  • Rene
stock market
Share
Tweet
Share

CFD trading can be a fantastic tool that shares wealth-building power with the general population. It does this by allowing you to trade and profit from financial markets with a very low barrier to entry. Within a few minutes, almost anyone can be opening long and short positions on the price movements of everything from shares to commodities and cryptocurrencies like Bitcoin.

However, this low barrier to entry also comes with risks for new traders. It means you can start CFD trading without knowing the full suite of tools and techniques for protecting yourself and your wealth, which leads to some beginners losing money very quickly.

Avoid these five common mistakes, and you’ll give yourself a much better chance of trading success in the long run.

Overtrading

The key driver of overtrading is the deeply human fear of missing out (FOMO). This happens to first-day beginners and 30-year veterans alike. For example, you may have a defined strategy for trading a certain commodity. But, you hear on the news that certain stocks are in an attractive bull run, so you emotionally decide to take out a long position in this area that’s outside your current strategy.

This is overtrading because you’re using your valuable resources (funds and time) in a trade you’re underprepared for. You’re more likely to lose in this trade since you’re diverting your resources away from your successful strategy. This can also include making more trades than you planned in a given asset class or trading pair.

To avoid overtrading, you need to be disciplined in the number of trades you make each hour/day/week, and in the markets you trade. Create a trading plan that limits your trading to within defined bounds and stick to it.

Overleveraging

Leverage in trading is a way to increase the value of your position without putting down more money. For example, with 10x leverage, you can open a position 10 times greater than you could without leverage. The benefit of leverage is that it increases your profit potential. But, it does this by also increasing your risk. Overleveraging is when this risk becomes too high and it becomes almost inevitable that you’ll lose everything.

What overleverage means is that your trades are too risky to be sustainable. If something goes wrong (which is common in all types of trading), you don’t have enough “buffer” to protect yourself from a complete wipeout. As a trader, you should focus more on the size of your positions than on the leverage ratio. Your risk should be small enough to allow you to make multiple (20, 30, or more) mistakes in a row and still not be wiped out.

As a general rule, beginners should stay away from leverage (especially high leverage) until they understand risk completely. After all, leverage is one of the key reasons CFDs are banned in the US.

Not Controlling Losses

Uncontrolled losses can devastate your CFD trading portfolio quicker than you can imagine. There are two main reasons for this. First is simply being unprepared and leaving falling positions unchecked. The second is a strong human psychological bias that leads us to stick with bad things too long, called the “sunk cost fallacy”.

To control the first, you simply need to use the trading tools available to you on any good trading platform. The main one is the stop-loss. These automatically close your position for you if your losses get too large. As a rule, you should put stop-losses on all of your trades, no matter how confident you are that the price will go up.

The sunk cost trap drives us to keep going with an endeavor past the point of rationality, simply because we have already poured so many resources into it. This is an error of judgment due to our emotional nature. You can use stop losses and defined trading rules to preemptively choose your exit points before you get emotional.

Not Locking Profits

The opposite of the sunk cost fallacy is staying with a trade longer than you should because you feel it’s already been so successful, it just has to continue! As a result, you resist locking in profits to see how much higher this can go (or lower in the event of a short trade). Improperly managed, this can lead to you losing a disproportionate amount of your profit over time.

To avoid this, use the opposite of a stop-loss, which is the take-profit trigger. This trading rule will automatically close your position for you to lock in your profit at a certain level. This allows you to make the take-profit decision before your trade is open and your emotions start running high. It also means you don’t have to constantly monitor the markets to make sure you get out at the right time.

Avoiding Reentries

Many people claim that learning when to re-enter a position is one of the hardest trading skills to master. But it’s actually quite simple. Close your position when it makes sense to do so. But then, re-evaluate the market to see if it makes sense to re-enter with a new position, just as you did when initially evaluating the merits of the position.

This doesn’t necessarily mean re-entering the position in the same way. E.g. if you just recently closed a short position, and your fundamental analysis suggests the market may have bottomed out, you can re-enter via a long position. As you’ve already done the groundwork in a trade you’ve just exited, you’re in a great position to re-evaluate and re-enter. Just avoid the psychological biases mentioned above!

Summing Up

Many of the most common mistakes made by traders involve not managing their emotions properly with the tools available to them. Avoid the drive to overtrade and overleverage, while using tools to make sure you take profits and control losses. If you follow these principles, you’ll greatly increase your chances of success with CFD trading.

____________________________________________________

Some other articles you might find of interest:

Understand how you can maximize your time to grow your business:

Time Is Money And Your Most Valuable Resource. Use it Wisely to Build Your Business

Looking for effective ways to drive and increase traffic to your startup website?

SEO Traffic Guide To Boost Your Blog Rankings

Looking for effective ways to drive and increase traffic to your startup website?

3 Top Reasons Why Startups Fail and How Not to Become a Victim

Thank you for your interest in THE KICKASS ENTREPRENEUR'S GUIDE TO INVESTING. Three Simple Steps to Build Massive Wealth with your Business's Profits. Please check your email to confirm the book download. Form: 400529

There was an error submitting your subscription. Please try again.

Related Posts:

  • Web Analytics: 7 Things You're Doing Wrong
  • 7 Things To Consider When Choosing The Best Stock Trading Platforms
  • Title: 6 Types of Asset Management
  • Why you Might Be Approaching your Job Search all Wrong
  • The Value of Trading and Investing in Cryptocurrency
  • What is the Future of Stock Trading?
Share
Tweet
Share
Rene

Previous Article
business signage
  • All Blogs

Can You Run a Small Business From Your Rented Condo?

  • April 18, 2022
  • Rene
View Post
Next Article
a laptop and a tablet with graphs and charts
  • All Blogs

Digital Entrepreneurship in 2022

  • April 18, 2022
  • Rene
View Post
You May Also Like
View Post
  • Financial and Investment Calculators and Economic Data

Which Forex Robot Is The Most Profitable In 2022?

  • May 24, 2022
  • Frances
coins and houses
View Post
  • Financial and Investment Calculators and Economic Data

17 Best Books On Real Estate Investing And How To Go Big

  • May 23, 2022
  • Frances
Best-online-stock-broker
View Post
  • Financial and Investment Calculators and Economic Data

5 Best Brokers For Penny Stocks with Great Track Record

  • May 18, 2022
  • Frances
Digital scheme with businessman hand with bitcoins, tablet and s
View Post
  • Financial and Investment Calculators and Economic Data

Should You Lend Your Crypto?

  • May 18, 2022
  • Frances
forex brokers
View Post
  • Financial and Investment Calculators and Economic Data

5 Best Forex Brokers For Beginners in 2022

  • May 13, 2022
  • Frances
sets of numbers
View Post
  • Financial and Investment Calculators and Economic Data

Platform Benefits of Metatrader 4

  • May 5, 2022
  • Rene
a person types on the keyboard
View Post
  • Financial and Investment Calculators and Economic Data

How to Grow a Big iGaming Brand: Fundamentals

  • May 3, 2022
  • Rene
a guy with a banner
View Post
  • Financial and Investment Calculators and Economic Data

The Top 10 Best Online Stock Brokers for Beginners

  • April 29, 2022
  • Frances

Join 6,472 Entrepreneurs That Get My Business Building and Wealth Creation Posts by Email

I can teach you how to build a successful, profitable business, and turn that into millions in personal wealth.

Thank you for your interest in THE KICKASS ENTREPRENEUR'S GUIDE TO INVESTING. Three Simple Steps to Build Massive Wealth with your Business's Profits. Please check your email to confirm the book download. Form: 400529

There was an error submitting your subscription. Please try again.

We won’t send you spam. Unsubscribe at any time.

Recent Posts
  • programming laptop 1
    How to Learn Programming Better and Faster
    • May 24, 2022
  • card 2
    What Poker Can Teach You About Winning In Business
    • May 24, 2022
  • coins and bills 3
    Managing Money: The Laws to Keep in Mind
    • May 24, 2022
  • pwd sign 4
    Making Your Office Accessible For Disabled Workers
    • May 24, 2022
  • amazon optimization 5
    How an FBA Audit Can Help You Recover Money from Amazon
    • May 24, 2022
Featured Posts
  • how to become wealthy
    The Entrepreneur’s Secret to How to Become Wealthy and Build a Personal Fortune
  • Most Profitable Small Businesses
    27 of the Most Profitable Small Businesses to Open in 2022
  • Become a Decamillionaire
    How to Become a Decamillionaire, Grow your Net Worth to $10 Million, and Join the 1% Club
Categories
  • All Blogs (861)
  • Canadian Financial Products (4)
  • Create Wealth (Investing) (106)
  • Entrepreneur Interviews (21)
  • Featured Post for Main Menu (4)
  • Featured Top Posts (23)
  • Financial and Investment Calculators and Economic Data (83)
  • Fitness (1)
  • Growing Profits (61)
  • Growing Revenues (98)
  • Growing Revenues (63)
  • Marketing (78)
  • Millionaire and Business owner interviews (2)
  • Positive State of Mind (64)
  • Real Estate Investing (13)
  • Retirement (13)
  • Reviews (12)
  • Sales (14)
  • Sell Me This Pen (7)
  • Selling your Business (13)
  • Startup Ideas (6)
  • Technology (8)
  • Top Products (4)
  • Uncategorized (45)
Follow us
Author
Jeff Wiener
Jeff sold his company to private equity in 2017 and is now semi-retired. Jeff spends time…

    CHECK OUT MY BLOG, AND SUBSCRIBE

    about
    The Kickass Entrepreneur

    Expand Your Business, Improve Profits, Create Wealth

    Expand your business, improve your profits, and create wealth. Each one of the three can be elusive goals. Follow the right steps, and you, too, can create financial independence. It is possible … you just have to take the right steps.
    NAVIGATION
    • About
    • Blog
      • All Blogs
      • Create Wealth (Investing)
      • Entrepreneur Interviews
      • Featured Top Posts
      • Growing Profits
      • Growing Revenues
      • Marketing
      • Positive State of Mind
      • Real Estate Investing
      • Retirement
      • Sales
      • Selling your Business
    • Book
    • Courses
    • Podcast
    • Resources
    • Contact
    TAGS
    apartment BATNA Business business failure business growth business sale Capitalization Rate CAP Rate cash cash flow Creating Wealth Discipline entrepreneur entrepreneurship excel extra cash Featured goal setting Growing Business investing investment real estate M&A marketing Marketing KPIs Mergers and Acquisitions | M&A | Entrepreneur Blog Millionaire millionaire next door mistakes MUR Peter Principle Profit profitability real estate retirement revenue Revenues sales sales management Semi-Retirement Blog | Entrepreneur Blog | Small Business Blog small business Stagnant stocks success Thomas Stanley wealth
    RECENT ARTICLES
    • pwd sign
      Making Your Office Accessible For Disabled Workers
      • May 24, 2022
      • No comments
    • amazon optimization
      How an FBA Audit Can Help You Recover Money from Amazon
      • May 24, 2022
      • No comments
    • Make an Extra $500 a Month
      How to Make an Extra $500 a Month on the Side in 2022
      • May 23, 2022
      • No comments
    • man doing lecture
      10 Different Ways to Acknowledge, Celebrate, and Reward Your Staff
      • May 19, 2022
    • business partner
      Finding the Right Partner for Your Business
      • May 19, 2022
    • online teaching
      How To Make Money With Online Courses: Learn From The Billionaire Way
      • May 18, 2022
    The Kickass Entrepreneur
    • Coaching
    • Book
    • Blog
    • Contact
    • Privacy Policy
    • Terms
    • Disclaimer
    • Facebook
    • LinkedIn

    Input your search keywords and press Enter.