With the progressing market, CFD trading has gained widespread popularity as a low capital-intensive method to trade. The trader can use this for trading thousands of tradable instruments including stocks, forex, commodities, cryptocurrencies, indices and several more. The ability of CFD trading to generate returns in both falling and the rising market makes it the best choice for a large number of traders.
Apart from this, there are several other benefits of CFD, which include:
- Higher Leverage
- No Borrowing stocks and shorting rules
- Spreads paid by traders
- Access to the global market with a single platform
- No day trading requirements
- Professional execution with no fees
- Weak industry regulation
- Many trading opportunities
However, the fact is that there is no guarantee of success in CFD trading. You can definitely make money from CFD trading, but it requires a sound approach to the market and a lot of hard work. Thus, to surge your chances of money-making, it is important to understand the concept deeply along with risk management techniques.
How to make money through CFD trading
There are some factors which will guide you in the right direction to finding success in the trading market. These factors include:
CFD trading is a vast field. It includes many concepts. Using leverages while trading is a tricky but profitable concept, price gaps exist, and with it exists overnight charges. Spreads and margin are again important factors which affect trading. Thus, to make money in CFD trading, knowledge is the only key.
The market is diverse, and so are its concepts and techniques. Many new strategies are emerging with the surging market popularity. So, the process of learning must go on whether you are an experienced trader or novice in the financial market. Adapt to the environment to build a consistent success.
There are some popular financial service providers which help you in the process of enhancing knowledge through their various trading courses. One such brokerage firm is HFTrading. It offers CFD trading tutorials, courses, articles, videos on demand etc. for all levels of traders. Their professional team designs these courses. Visit the site to check out.
2) Strategizing and planning
The CFD market needs a disciplined approach. It will help if you have a strong trading plan which requires regular updates as you acquire more experience and refine your skill. Always remember that your strategies must be tested and tried, which fits your risk appetite and trading style. Without a plan and strategy, you are just gambling and most probably throwing away the ability to create money.
“Practice can make a man perfect” you must have heard this saying. It stands true in the trading arena. Your ability to invest time practising rather than directly jumping into the trading can generate the potential profit and will help you in the long run. Practising on a virtual or demo account for months might seem boring. But, it is the best time when you can build a routine which will help you keep your emotions at a minimal level and decision making when you start real trading.
Of course, knowing the factors which will make you a good trader will not help along. It is required to implement all these rules and techniques in your trading.
HFTrading offers a demo account to its traders along with three retail accounts (gold, silver platinum), professional account and Islamic trading account. The minimum deposit to start trade is $250 without a commission fee.
Hurdles in the way of money-making through CFD trading
1) Not monitoring your trades
The CFD trading is complex because of market volatility, rapid price variations outside the regular trading hour and requirement of low entry capital. These factors can easily and quickly change your account balance and winning position. Gapping in amount can leave your stop-loss order empty, and the margin call can be near. Hence it is essential to monitor your trading account frequently. By this, you will be able to take action and react when you find any variation in the market events.
2) Not paying attention to diversification
A leveraged tool, which you receive with CFD trading, has a high risk due to unpredictable market swings. It would be best if you trade vigilantly. One of the major ways to mitigate the level of risk is diversification. It is essential to diversify across several global markets and instruments. It will act as a shield when the major market swings occur unexpectedly. It could be more clear with an example of financial crises in 2008. When the cries hit the market, the investors who invested in diverse trades were less hard-hit in comparison to those who invested their entire money in a single trade.
3) Being disorganised
CFD trading is not just about understanding and knowing the complex details of the financial market; it is also about organising things. Without a strategy, you cannot move ahead with confidence. It can also lead to wiping your whole account before you get into the way of making any money. For formulating the plan, you must include the points mentioned below:
- Money and risk management plan
- The strong trading strategy which must be tried and tested before implementing
- A clear framework of your long-term targets, goals and expectations
- Enter realistic goals in your plan
You can also stay organised by keeping some trading journal with you. These journals help you to maintain a record of various things like:
- The assets you trade and the reason for choosing them, for instance, did you use technical analysis or fundamental analysis?
- Whether the trade generated profit
- When you excited and entered the trade
- The lesson you learnt as a trader from the trade management
- How you managed things and emotions while trading in difficult trading condition for example in the volatile market conditions
The ultimate key to get success in the market is stick to what you already know and what you have experienced most. Move to another field when you are confident enough and have sufficient knowledge plus practice in those novice fields.
Overtrading generally takes place when the trader identifies opportunities on the financial market, not because these are already there but because he wants them to be there. There are mainly two types of overtrading: trading too often and trading too much.
- Trading too often
It happens when the trader is too emotional, and he does not want to miss out anything. They open those traders which they should not. It happens because they fail to understand the fact that trading on the right trade is essential rather than trading too many trades.
- Trading too much
It generally happens when a trader wants to enhance the potential profit that too at a stipulated amount of time. He over-leverages the trader to fulfil the purpose. In most cases, these types of traders end up maximising the loss size instead of maximising profit.
The primary takeaway from overtrading is always testing a specific technique in the risk-free environment. With this way, you will learn how to trade, when to trade and how to make use of leverage properly.
5) Using leverage and margin incorrectly
Leverage is important for trading the high-value trade. With leverage, the brokers allow you to trade on those assets which you might not afford. The entire amount of the trade is divided into two amounts: the amount paid by the broker and the amount paid by the trader. You can see how profitable it is trading on leverages. But, it is a double-edged sword. It can amplify your gains and can wipe your entire trading account if not used correctly.
How to get started with CFD trading?
Once you have a proper trading plan to execute the trade, and you are aware of the common mistakes, it is time to begin your trading journey. To start you require the right CFD provider or more precisely a legitimate CFD brokerage firm. The better the quality of the broker, the better and simple will be your trading process. Moreover, an excellent broker can provide you with an excellent return on investment.
Before selecting the broker and opening account, make sure that it stands on all your requirements and expectations. It should also match your style of trading and offer you the right support and tools. You can opt for HFTrading. The leading and legitimated broker, paving the way for ultimate trading success.
Steps for opening a trading account with the broker:
1) Visit the official website of the broker. Always check the URL of the website because many fraud activities are running in the financial market. The design of multiple websites can be the same, but their URLs always vary.
2) Get yourself registered by entering the name, surname, mobile number, email id and profession.
3) Upload the required documents
4) Choose the trade and deposit fee for the same.
5) Start trading
The Bottom Line
The answer to the query Is it possible to make money with CFD trading must be clear now. It is possible to make money with the sound trading skill, a lot of practice, patience and discipline. Profitable and successful CFD trading is possible just the need is making the right choices and executing these choices with the right approach. The broker also plays an important role in strategizing your investment. So, choose the broker wisely.