Contract For Difference (CFD) allows traders to speculate on price movements of an underlying asset, without ever actually owning the asset in question. According to Investopedia, CFD trading has gained massive popularity over the past decade, proving to potentially be quite lucrative for those with an aptitude for it, or those who enter the market with the assistance of a professional trading platform. I have found these services to be extremely helpful, offering education and on-demand support.
Steps to Success :
1. Choosing the Correct Platform for You.
The first practical consideration would be to partner with a platform whose asset base, bonus structures, and leverage options suit you best.
The second consideration would be to assess how well you gel with their trading platform and software. Is the platform easy to use and understand? Do they offer any additional features, like over-the-phone assistance or an online education portal to help you make the best use of the platform?
Take your time exploring your options, but remember that with there being so many options, choosing one with incredible customer service is going to pay off almost immediately. First prize would be choosing a platform that offers platform and trading education as part of their basic services.
2. Your Risk vs Reward Threshold.
A common misconception when it comes to risk and reward in CFD trading is that under certain limited circumstances, pursuing higher rewards automatically exposes traders to higher risk. Risk management measures employed by top crypto trading platforms attempt to limit traders’ risk to only the amount of funds they commit to a trade. High volatility and the likelihood of negative outcomes of trades become a much easier pill to swallow when your risk is potentially limited, but your rewards could potentially be magnified tremendously thanks to bonuses and leverage.
3. Choosing Your Trading Style.
Trading styles are defined by your predetermined time horizons and the amount of capital you are hoping to commit to trades.
Here are a few of the most common and effective trading styles, according to Investopedia:
- Day traders tend to hold positions for minutes or hours – but never overnight.
- Swing traders look for opportunities that might take several days to develop.
- Position traders have the longest time horizons and their trades can last for weeks, months – sometimes even years.
When it comes to the amount of funds traders commit to a particular trade, one should simply remember that the more you put in, the more you can potentially get out.
Trade often and expose yourself to many opportunities to capitalize, but trade big to maximize your potential return.
4. Acting on Data, Not Emotion.
The purpose of continually analyzing the markets is to determine the best time to enter or exit a trade. Trade signals are the most important aspects for traders to consider while remembering that news and rumors can have a powerful effect on the market and often create lucrative trading opportunities.
“Buy the rumor, sell the news” – Anonymous
Below are the three pillars to make an educated trade placement decision. – According to Orbex.com
Looking at changes in the price of assets on their corresponding action charts, using tools such as support and resistance levels, candlestick patterns, and other indicators. It works on the theory that one can look at the historical data of price movement and, based on their findings, potentially predict an assets’ next movement.
Looking at global news updates on the markets provides a larger, more wholesome indication of the overall health of the crypto market that technical analysis cannot provide alone.
Technical + Fundamental
Market sentiment refers to the overall emotions of traders. It is the feeling and collective psychology of the market concerning buying and selling, as revealed through the activity and price movement of the asset traded in that market. Traders typically describe market sentiment as bullish or bearish.
Cryptrader offers excellent education on all three of the pillars, it is definitely worth checking them out when picking your platform.
5. Exercise Self-Control.
Crypto traders must understand their own emotions, especially that of fear and greed.
“FOMO”(Fear of missing out) is the buzzword that is most likened to this idea, where traders will find themselves in one of the two following positions:
1. Buying/placing trades on assets when the asset nears all-time highs, only to be met with disappointment when the markets suddenly dip. Traders then find themselves buying high and selling low.
2. Being in a position to place trades when the markets are dipping, but hesitate, and miss the opportunity to buy low and sell high. The ability to control one’s emotions and stick to your trading strategy will most likely be the difference between traders staggering possible success and catastrophic failure.
Contract For Difference (CFDs) allows traders to speculate on an underlying asset, without ever actually owning the asset in question. 5 steps to successful trading are;
- Choosing the correct platform for you
- Understanding what your risk/reward thresholds are
- Choosing your trading style
- Not trading on emotion
- Exercising self-control
If it sounds like you have the appetite required for CFD and trading on cryptocurrency, you may have front-row seats to see the evolution of the financial market. Make sure you take advantage of the professionals and resources that are available through professional trading platforms.