Can a Beginner Make Money with CFDs Trading?
My answer is YES! As long as you do your homework!
In this post I show you all you need to know to trade “securely” with CFDs.
The ability to take interesting profits home through CFD trading is a very attractive option for a beginner. However, this financial tool hides pitfalls you need to know and be able to face before investing even a penny.
Let’s begin!
Disclaimer
The information contained in this article is for illustrative purposes only. They are not in any way a financial advice or an invitation to invest your money following the information below. Trading is a high risk business, don’t invest more than you are willing to lose.
What are CFDs?
CFDs or Contracts for Difference are negotiable online financial instruments through which to make profits from the price changes for example of a stock, currencies, commodities.
For example, by trading on Amazon CFDs, results are obtained based on changes in the Amazon stock on the stock exchange.
Trading with CFDs, therefore, is a practice that consists of making a forecast on the performance of financial markets and making a profit if our forecast is right. Whether it’s a “long” or “short” forecast.
Obviously it is not enough to know what CFDs are to start earning with them, which is why I have grouped 13 steps to become a successful trader.
13 tips to make money with CFDs
#1 beginner make money with CFDs: Technical analysis
Like any self-respecting trader who really wants to make a steady and continuous income, you cannot ignore technical analysis.
Not sure where to start?
All the traders who operate safely on the markets have learned the basics from the manual considered by all as the “bible” of trading: “Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications” by John J. Murphy.
I started with this book. Do you want to know what I think?
Complete, exciting, super professional.
It contains all the notions that a trader has to carry with him every day before opening any position.
It can be found on Amazon, buy it and you won’t regret it.
#2 beginner make money with CFDs: mastering leverage
All online trading strategies must include the presence of leverage and control that must be had of this important tool. A rather limited investment is enough to get good earnings.
Most brokers allow the use of levers 1:30 some even 1: 100.
This means that for some assets the strength of the investment is multiplied hundreds of times.
But we must always pay attention to the leverage in our trading strategies because in addition to the potential profits, large losses can also occur.
Watch out then!
#3 beginner make money with CFDs: Use the stop loss in the right way!
Through the stop loss you can control the financial leverage well.
One of the most important suggestions is a wise use of the stop loss.
If not used you risk the entire capital, if used too stringently you risk limiting your earning potential too much by going into loss more than you should.
There are different strategies to position the stop loss correctly, to open positions with an advantageous risk reward ratio.
#4 beginner make money with CFDs: Make a Trading Plan
Having clear and planned objectives is fundamental for a Trader who wants to operate successfully in the markets.
For this reason it is necessary to draw up a Trading Plan before investing your money in a trading activity.
There are several strategies that allow us to earn is long term for example monthly earnings strategy but even in shorter periods such as the weekly , up to the daily investment strategy or intraday strategy, wich contemplate the use of a stop loss.
#5 beginner make money with CFDs: strategy backtesting
Before starting to use any strategy it is important to evaluate its behavior over time to see if it has brought profits or loss over the years.
How to backtest strategy?
You can do manual backtesting or you can use special software to scan the markets going back 7/10 15 years.
This way we will know if our strategy will be a profitable or a losing one.
#6 beginner make money with CFDs: Diversify
As in every situation of life, investing everything in a single situation can be a very dangerous choice.
Indeed it’s vital to diversify your investments, you could diversify by choosing to invest in different currencies, stocks, etfs or commodities.
Having a diversified portfolio allows you to protect your capital, in fact when there is an asset at a loss another will be in profit.
It is very important not to expose your capital too much, viceversa you should invest a very small percentage of it for each operation .
Good Money Management System will often advise you not to invest more than 1/5 % of your capital for each transaction.
Trading is a marathon and wins who arrives farther!
Investing all your “chips” in a risky operation because you think you will get huge gains, only leads to the destruction of the account.
#7 beginner make money with CFDs: Choosing the broker
Choosing a regulated broker is a fundamental step to operate in total safety and legality.
In case you are a beginner I advise you to use eToro, it is regulated by Cysec and at the same time you can automatically replicate all the trades opened by expert traders who operate with this broker.
I have written a simple guide that will guide you step by step to find the best eToro traders, you can read it HERE.
Otherwise there are a lot of good brokers like 500plus.com, 24option, xtb.com and so on.
In case you don’t know how to choose a broker correctly I wrote a very simple guide in which I explain you how to easily find the broker that best suits your needs.
You can read it HERE.
#8 beginner make money with CFDs: Entrusting market analysis to experts
If you are just getting started with technical analysis you should look for an advice from most expert traders.
Many times you will not identify continuation or reversal patterns or recognize well a trend or draw correctly the trendlines.
If you don’t know where to find experts you can visit tradingview.com, you will find a bunch of technical analysis provided by professional traders.
In this way you will have a clear and correct vision that will allow you to make the best decisions before entering the markets.
#9 beginner make money with CFDs: Learn from the experts
Since trading is a complex world that must be faced in the simplest way it is fundamental to learn from traders who have been operating in the markets for many years, in order to avoid the classic mistakes made by a beginner and accelerate the learning process.
There are several online courses held by professional traders from which you can learn a lot.
Before choosing a course I strongly suggest you to check the trader’s statistics and the reported earnings over the years.
#10 beginner make money with CFDs: Know the market timetable
If you are operating on Forex it is important to know that it is possible to invest 24 hrs 5 days a week.
But this is not the only important thing you should bear in mind!
In fact the Forex market lives mainly of three moments during the day, each characterized by a different volatility and “agitation”.
For example, everybody knows that most of the exchanges take place during the European session and therefore there are theoretically more opportunities to earn.
#11 beginner make money with CFDs: Pay attention to the economic calendar
The knowledge of the economic calendar may seem an optional choice but in reality it is not so.
In fact, it is fundamental to know it because many events can influence the trends and put our positions at risk.
Moreover we must skim all the appointments that do not concern the assets we invested in in order to concentrate on those events that can potentially affect our portfolio
#12 beginner make money with CFDs: Write a Trading Journal!
Creating a trading journal is a great way to keep track of all the open positions and all the assets we have invested in to check our trading activity at the end of the month or at the end of the year and evaluate which adjustments are needed to increase our profits.
It may seem a boring operation of little importance but it always turns out to be an excellent strategy to protect our capital and improve our strategies.
It is possible to write down all the open positions at the end of the day.
For this purpose you can use a simple Excel file.
All this process just requires a few minutes per day.
#13 Last important tip: Control emotions
Emotionality is one of the first factors of loss for a trader!
It can affect our decision-making capacity and therefore endanger our portfolio.
The winning key to keep emotions at bay is to follow your trading plan rigorously and do not break the rules.
This way you will not manually change or close your open positions thus limiting the chances of earning.
It does not mean going to profit 100 times out of 100, we can also go into profit 50 times out of 50 but operate with a very advantageous risk reward ratio and still being in profit.
Conclusion
As you can see working with cfds is not a very complicated operation.
The secret for a winning activity is discipline, the more you will operate and study in a disciplined way, the more chances of profit will have.
Always bear in mind that trading is not a 100 meters sprint but a marathon.
This way you will have more control over emotions and increase the quality of your life without forgetting that besides money there are also other things.
I strongly recommend you to take care of all the other fields of your life and cure social relations, physical activity and relax moments.
Living 360 will lead you to invest in a safer, more serene and certainly more profitable way.
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