Due to the increased number of traders who are willing to be involved in trading CFD, there is an observable tight competition happening among CFD providers. A lot of these companies offer promising profit and protection against risk. Consequently, I must say that these features under their promos are effective if a CFD trader knows how to use them well. But before you start jumping into the application of a particular strategy in the trade, it would be better if you fully understand the correct process of making a CFD deal. Today, we will feed your mind with 5 Simple Steps to Follow in order to place your orders correctly.
Step 1: Pick your target merchandise:
CFDs offer a wide array of tradable merchandise with distinct characteristics. They come in forms such as shares, indices, currencies, commodities, interest rates and bonds. With its versatility, the process of trading CFD starts by your decision to pick which among these forms suit your taste for trading. In order to do such, the target trader must have an in depth idea on the features of every item. Financial Charts and analysis will also help a trader identify which among these CFDs are in demand at the moment.
Step 2: Pick your trading style:
Most well experienced CFD traders would agree to the notion that trading styles should be personalized. Thus, you have to pre determine the maximum amount of risk which you can tolerate in a single trading session. In most cases, traders are asked whether to go on a long or short position. A long trading position or buying position is a decision to buy the market when rates go up. You however go on a selling position if the rates of the commodity goes down.
Step 3: Pick your lot sizes:
Sizes vary depending on a specific CFD commodity that you deal with. The usual tip to determine the allowable sizes in a trading platform is to check the tick value that is indicated in market information sheets. As a merchandise where profits and losses are based on leverage, a trader must remember that purchasing assets with large sizes means that you need to have larger margin as it is obviously more expensive than small trades.
Step 4: Pick your security features:
As mentioned earlier, several brokers offer security features that help protect losing your account. One among them is called stop loss order. This feature is a must add-on instruction which is geared to give authority to your broker to perform necessary action once your account reaches the established risk level.
Step 4: Pick your monitoring strategy:
After placing your position then adding some security features, the next thing that you need to do is to sit backcross your fingers and hope that your actions would favor market rates. This is done with the help of charts that tell you the real time status of your profits and loss.
Step 5: Pick the close option:
You’ll know that it is time to close your position when you get satisfied with your deal results. A particular deal result does not mean that you always need to win. Keep in mind that losing your position is but a normal event in a particular trading session. Thus, you should be ready to close a deal once you have enough reasons why your results turned out the way it is and you have to use the result to create a better trading strategy in your next trade.