20 October 2022

Insights

CFD trading: Pros vs Newbies

CFD trading- Pros vs Newbies
CFD trading- Pros vs Newbies

It seems like everyone is opening a trading account, installing mobile apps and desktop trading platforms, and adding online trading CFDs to their financial activities.

But is it easy to make money from CFD trading? You’re probably expecting me to say “yes.” I’m not. It’s not. If it was easy to make money online, everyone would be doing it.

Is it possible to be profitable with online trading? The answer is a solid yes, but very few achieve it with consistency. There are traders in Exness that have been with us for many years, and they are still making money.

So what does a successful trader do that others don’t? If I had to offer you something definitive to demonstrate a pro’s better approach to CFD trading… the pros go beyond the cliche surface activities and dig deeper than the amateurs. By this, I mean, they master certain topics. They become an expert on a few chosen asset classes and rarely leave their comfort zone. Allow me to expand on that statement with detail.

Taking CFD trading to another level

So you’ve got a brokerage account and an innovative online trading platform. You’ve watched some videos on CFD trading patterns and even started trading market news. You know how to use indicators and other analytical tools.

At first glance, it seems you are doing everything you can to put your trading account into a positive. But, let’s go off topic, just for a moment, and compare trading CFDs with driving. 

Imagine a novice driver. Got a car? Check! Studied the driving manual cover to cover? Check! Watched friends driving while taking notes? That too. The brakes, accelerator, indicators, lights, the novice has committed all functions to memory.

Is that new driver ready to get behind the wheel and hit the streets? Probably not. The chances are, there will be an accident on the first day.

Whether intraday trading or long-term options trading, the process is much the same. Knowing everything about your online trading platform is necessary, but that alone won’t guarantee good results when trading CFDs. There are so many things to know. What are the optimum trading hours? Are you keeping abreast of trading market reports?

Pro traders can recognize trading patterns in seconds and only use indicators and plotting tools to confirm their hypothesis. How well can you eyeball charts?

I always recommend advancing your CFD trading knowledge. Whether it’s studying stock chart patterns or researching every fundamental release on the economic calendar, learning is a very important ingredient in the recipe for success, for any and all business ventures. And like driving, learning by “doing” is risky yet necessary part of advancement. Time spent on your online trading platform will ultimately yield the greatest improvements.

And there’s another aspect that separates the pro CFD traders from the rest, one that’s much more internal. One that even the pros struggle with from time to time. Ignoring it can spell doom for even the most knowledgeable traders.

Trading Psychology: Avoiding that massive stop out

Trading psychology is a very overlooked and widely misunderstood topic. Not being aware of your mindset can lead to impulsive trades. Many pro CFD traders have at least one story of a trade they made, based on emotional judgment, that cost them dearly.

There are entire books about trading psychology, but when you condense the information into a few generalized paragraphs, it all comes down to not reacting to trading market news without first doing the research.

We humans, by nature, look for signs that support our internal conclusions, and subconsciously ignore everything that doesn’t align with our current opinion. Just one or two optimistic reports on AAPL can trigger a buying frenzy for emotional traders. They’ll skip deep analysis completely, believing/hoping that their forecast is accurate. Trading CFDs in such a way can create big paydays, but more often it will result in demotivating and sizable losses.

Not getting emotionally involved is easier said than done, especially when leveraged CFDs can multiply a position. Trading communities help keep realistic views of the markets. If you are in a trading community, chatting with someone who opposes your forecast can be revealing.

Just make sure the other traders are not apposing you with emotionally based opinions. Ask questions and let them prove or disprove their hypothesis.

So, you know how CFDs work, and you’ve mastered your available CFD trading tools to a level where you can teach it. You’re about halfway there. There’s still one simple and overlooked truth about trading that can make all the difference.

Treat online trading like an online business

People who prefer to use a day trading strategy often develop habits that are more like a hobby than a business. The average CFD trader finds about one or two hours within their busy schedule to sit and check the market. Make a little technical analysis, find a well-supported reversal pattern here, a double bottom there, and then hit the buy or sell button.

Now compare those online trading practices with modern entrepreneurs who are building an online business. How much success do you think they would see with a similar and shallow level of dedication? The answer is obvious. Very few businesses generate a stable income when built on rushed or weak foundations, and the churn-and-burn entrepreneurs usually abandon their business within the first year.

Business owners follow common practices that promote stable growth. They find a popular market that is not too competitive. They invest an amount that will give the business some flexibility without challenging their personal finances.

They might start small, scale up based on performance, and when possible, reinvest initial profits straight back into the business. It’s all standard stuff that most people already know, and yet so many traders don’t follow such practices when it comes to online trading.

First, find a popular market that interests you. Then fund your trading account with an amount that will give you flexibility without challenging your personal finances. Trade three CFDs within your budget, never break your own rules, and scale up slowly.

And when possible, reinvest initial profits to increase your daily trading budget. Are you doing that? Is that your current strategy?

Remember to invest your time as well as your money. Every savvy entrepreneur spends days, weeks, or even months researching a market before they dive in with their wallet out. CFD traders can operate in a similar way too… and should! Identifying an attractive asset class offering potential in the current financial climate comes first, then researching it with depth.

Traders often ask me how far they should go? How much do you need to know about CFD trading? When is enough actually enough? Here’s a nice benchmark for you. 

Let’s say you want to trade the S&P 500. How well do you know stock market behaviors? If you had to go on a TEDx stage and talk about indices CFD trading, how long would you last, and would the audience applaud you when you are done? Test yourself. Try telling a friend about your favorite tradable assets and why they are so appealing.

CFD trading like a professional

One thing most traders agree on is diversification. Don’t put all your eggs in one basket. It makes sense. Most people with more than a year’s experience trading CFDs know that cliche yet sensible practice. But trading multiple asset classes means learning a lot.

Consider focusing your research on three assets that you already like. If you’re focused on stock CFD trading, study everything you can find. Look at financial statements both current and historic. Was there a management structure shift recently? Any new product releases coming soon? If it’s a tech company, is it leading the field or fading into oblivion?

Know the company as though you intend to apply for the CEO position. Only when you can hold an authoritative conversation about an asset with other traders are you ready to trade it. 

Consider what you’ve just read as page 1 on your journey towards pro level trading. Increasing your CFD trading knowledge is paramount, but remember, practical experience and learned instincts transform a novice trader into a professional, not book smarts. 

When you start noticing how trading conditions make a major difference in profit potential, give yourself a pat on the back. You’ve leveled up your trading experience. Only pro traders feel the difference, and that’s when they start researching broker trading conditions.

We know that. That’s why Exness Research professionals continue to develop a product and service that offers our traders the best possible trading conditions, tools, and market prices. Thanks to hundreds of innovative people and ideas, many of our current advantages are far beyond the capabilities of other online brokers.

Our goal is to give Exness traders a long and fruitful trading experience, and this mindset has prompted massive company growth. Thousands of traders are moving to Exness for our competitive pricing models, and staying because of the multiple trading features and advantages that we offer. Every millisecond counts, every pip counts. So if you’re not trading CFDs with Exness yet, visit our homepage to see what unique features we offer as standard. Take your trading performance to the next level with a broker than offers a trading venue as it should be.

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