Dumb Things CFD Traders Do
Trading is difficult enough without a simple mistake taking away all your hard won profits. Here are a few ideas that could save you thousands by avoiding silly mistakes.
Is it Buy, Or Sell
It is not unusual for a trader to push the wrong button when entering or exiting from a trade. It is most common to push sell to get out of a short position, when you really meant to buy. Sometimes it just gets so confusing, so instead of being out you end up with double the quantity.
This mistake is easily caught by checking in with your open positions after you place a trade to ensure that the trade you have placed did what you expected. If caught immediately this mistake is easily rectified and is likely to only cost a small sum for a stupid mistake. If you do not realise your mistake and the position is left open this can have disastrous consequences for your account.
Remember Your Stops
Often a trader will decide to exit a position at market, because they do not like the current price action. But if they have the discipline to always use stops then the stop order must be cancelled after the trade is exited. If it is left open the order can be executed and it could be many hours before you realise that this has happened. The trade may or may not go in your favour, how it plays out is an unknown, but certainly not something you want left to chance.
To catch this mistake, always check your open trades and stop losses before closing your trading platform. This way you will know what trades you have open and avoid any unpleasant surprises next time you trade.
Oops, Too Many Zeros
While it is possible to get the maths wrong when calculating your position size it is far more common to get the number of zeros wrong when you place the trade. An extra zero means your risk increases by a factor of 10 times and forgetting a zero reduces your profits to 1/10th.
When you look at the open positions after you place an order you should be easily able to verify that the order you placed was the correct size.
Tight Stops Create Losses
If a stop is placed too close to the current price, it is very likely that the stop loss will be triggered by normal price movement. While the trader that places a tight stop is attempting to avoid losing money, this is often the end result of their actions.
Stops must be placed far enough away from the price action to exit you from a position if your trade view turns out to be wrong. Give the underlying share room to move to avoid getting caught by this CFD mistake.
Follow The Rules
The last common CFD mistake is to enter a trade when you know that you should not. It is common for new traders to chase a share and jump on board after the share has been moving, however they will quickly learn the error of their ways. A beginner has an excuse, they do not know any different, but even more experienced traders are caught in this trap.
But remember that there are an endless number of trades available, literally more possibilities than you could imagine and if you do not trade now, there will always be another opportunity. Using a checklist to make sure all your setup and entry criteria are in place is one way to avoid the impulsiveness that can be so costly in the markets. Stick to your strategy.
These simple mistakes can be eliminated by learning a number of simple habits that can dramatically improve your profitability. - 23223
Is it Buy, Or Sell
It is not unusual for a trader to push the wrong button when entering or exiting from a trade. It is most common to push sell to get out of a short position, when you really meant to buy. Sometimes it just gets so confusing, so instead of being out you end up with double the quantity.
This mistake is easily caught by checking in with your open positions after you place a trade to ensure that the trade you have placed did what you expected. If caught immediately this mistake is easily rectified and is likely to only cost a small sum for a stupid mistake. If you do not realise your mistake and the position is left open this can have disastrous consequences for your account.
Remember Your Stops
Often a trader will decide to exit a position at market, because they do not like the current price action. But if they have the discipline to always use stops then the stop order must be cancelled after the trade is exited. If it is left open the order can be executed and it could be many hours before you realise that this has happened. The trade may or may not go in your favour, how it plays out is an unknown, but certainly not something you want left to chance.
To catch this mistake, always check your open trades and stop losses before closing your trading platform. This way you will know what trades you have open and avoid any unpleasant surprises next time you trade.
Oops, Too Many Zeros
While it is possible to get the maths wrong when calculating your position size it is far more common to get the number of zeros wrong when you place the trade. An extra zero means your risk increases by a factor of 10 times and forgetting a zero reduces your profits to 1/10th.
When you look at the open positions after you place an order you should be easily able to verify that the order you placed was the correct size.
Tight Stops Create Losses
If a stop is placed too close to the current price, it is very likely that the stop loss will be triggered by normal price movement. While the trader that places a tight stop is attempting to avoid losing money, this is often the end result of their actions.
Stops must be placed far enough away from the price action to exit you from a position if your trade view turns out to be wrong. Give the underlying share room to move to avoid getting caught by this CFD mistake.
Follow The Rules
The last common CFD mistake is to enter a trade when you know that you should not. It is common for new traders to chase a share and jump on board after the share has been moving, however they will quickly learn the error of their ways. A beginner has an excuse, they do not know any different, but even more experienced traders are caught in this trap.
But remember that there are an endless number of trades available, literally more possibilities than you could imagine and if you do not trade now, there will always be another opportunity. Using a checklist to make sure all your setup and entry criteria are in place is one way to avoid the impulsiveness that can be so costly in the markets. Stick to your strategy.
These simple mistakes can be eliminated by learning a number of simple habits that can dramatically improve your profitability. - 23223
About the Author:
Jeff Cartridge is a private trader from New Zealand and co-created the website LearnCFDs.com Learn the Foundation of Successful Trading CFD Trading Strategy
posted by X - Men @ 2:58 AM
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