Trading CFDs has been around for so many years and it is to no surprise that people start to get interested in it nowadays because of the latest technology that we have. This time, online trading has been rampant and retail traders are allowed in the market. New traders may think that trading currency is easy since the initial capital is very easy to obtain. However, when they start trading, they start to encounter problems and eventually encounter problems that are hard to resolve. The ending? They get too broke that they cannot cope with the loss and just quit trading.
When using leverage, you must be extra careful – after all, it is a double-edged sword that has a double effect. There will come a time when you get too tempted to take on large positions because you won some trades. But remember the double-edged thing? You can earn profits but you can also lose big time. For beginners, it is advisable to start as low as the 10:1 leverage ratio and no more than that. If you are an experienced trader, you can reach as high as a 50: 1 leverage ratio.
Don’t Forget the Stop Loss
This is the crucial part – use a stop loss. Using a stop loss will protect you from huge losses, including your capital. In Forex trading, you are lucky enough to be given the chance to decide when to stop and use a stop loss. Stop-loss acts like a helmet when you’re riding a motorcycle. It shields you in case an accident happens. Just like in trading – it shields you from huge losses that may endanger your trading capital.
Create a Trading Plan
Before you start trading, there’s one thing that you need to prepare – a trading plan. A trading plan must consist of the actions that you should do throughout your trade. This trading plan has similarities with a business plan but with totally different content.
Stick To Your Trading Plan
Since you exerted a lot of time creating a trading plan, you must not forget the hardship that you put through it. You have to follow and stick to it no matter the circumstances you face when trading. If you don’t stick to your trading plan, it is just like wasting your time creating a trading plan and not following it all throughout.
Manage Your Emotions
When you trade and you encounter wins, you get too excited that you want to be greedy. You want to win more and refuse to follow your trading plan. Then, you end up on the wrong path and lose everything you own including your trading capital. On the other hand, you lose in one of your trades and you have the feeling that you should take revenge. Then you overtrade which resulted in a huge loss. This is the reason why you must control your emotions when you trade. As much as possible, you should set aside these emotions and trade according to the trading plan that you created.
Consider the Size of Each Position
For a new trader, it is important to be very careful when choosing a size for your position. As much as possible, start small and increase the size gradually as you gain more experience in trading CFDs.