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
One of the first mistakes that is very common is pushing the buy button when you meant to sell or the sell button when you meant to buy. This often happens when exiting a position especially if you are trading both long and short. Instead of exiting the position you end up with a position size twice what you started with.
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.
When it comes time to close your trading platform look at both your open positions and also check your live or working orders. Make sure there is a match between the two to ensure you are not surprised next time you go to trade.
Was That $10000 or $100000
Assuming the trader has the discipline to calculate their position size in the first place, sometimes it is possible to get it wrong. The most common error here is not usually bad maths, it is incorrectly entering the number of zeros. Too many zeros and your risk increases 10 times, too few and your profits evaporate.
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
A very common mistake made by traders is to use very tight stop losses. If the stop order is very near to the current price it can be hit by the normal fluctuations that occur. Tightening the stop loss does not prevent losing money, it often creates it.
Stop placement is a critical piece of your trading puzzle. The stop should be placed outside of the normal fluctuations of the share and at a place where your trade idea will be clearly proved incorrect.
The Ultimate Mistake
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.
The market offers an unlimited supply of trading opportunities, far more than you could ever possibly trade. If you miss a trade today, there will be another trade along soon enough. By following a trading plan you can avoid getting caught by impulsive trades, which can prove to be costly.
While no trader will be right every time, these silly mistakes can be easily avoided or caught before they have any real impact on your account. - 23222
Is it Buy, Or Sell
One of the first mistakes that is very common is pushing the buy button when you meant to sell or the sell button when you meant to buy. This often happens when exiting a position especially if you are trading both long and short. Instead of exiting the position you end up with a position size twice what you started with.
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.
When it comes time to close your trading platform look at both your open positions and also check your live or working orders. Make sure there is a match between the two to ensure you are not surprised next time you go to trade.
Was That $10000 or $100000
Assuming the trader has the discipline to calculate their position size in the first place, sometimes it is possible to get it wrong. The most common error here is not usually bad maths, it is incorrectly entering the number of zeros. Too many zeros and your risk increases 10 times, too few and your profits evaporate.
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
A very common mistake made by traders is to use very tight stop losses. If the stop order is very near to the current price it can be hit by the normal fluctuations that occur. Tightening the stop loss does not prevent losing money, it often creates it.
Stop placement is a critical piece of your trading puzzle. The stop should be placed outside of the normal fluctuations of the share and at a place where your trade idea will be clearly proved incorrect.
The Ultimate Mistake
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.
The market offers an unlimited supply of trading opportunities, far more than you could ever possibly trade. If you miss a trade today, there will be another trade along soon enough. By following a trading plan you can avoid getting caught by impulsive trades, which can prove to be costly.
While no trader will be right every time, these silly mistakes can be easily avoided or caught before they have any real impact on your account. - 23222
About the Author:
Jeff Cartridge is the author of Supercharge Your Trading with CFDs and co-created the website LearnCFDs.com Discover How to Triple Your Profits With Less Effort CFD Trading Strategy
posted by X - Men @ 2:44 AM
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