How Do You Mitigate Risk when Trading CFDs?
A look at the importance of risk mitigation through sound trading practices.
Practicing good risk management is a core component to any CFD traders’ strategy. There are many opportunities associated with trading in various asset markets but, like we see everywhere in life, there are also risks. Here are a few tried-and-tested tips on mitigating the risks associated with CFD trading.
1. Learn Good Money Management Practices
When beginner traders start their journey, they often focus on the technical side of trading, the terminology and the associated strategies. It may seem obvious, but not everyone takes the time to focus on money management and the risks on their strategies. Here are a few ways to improve your money management when trading CFDs:
- Study common CFD risks and learn to recognize them in real time
- Routinely re-evaluate and analyze those identified risks
- Determine viable and reliable solutions to the above risks
- Implement and manage these solutions regularly
- Continue to practice the above with discipline regardless of emotion
- Stick to your pre-determined strategies
- Practice position sizing
There are tools offered by good brokers like CedarFX, that can assist you in achieving the above list of money management tips. Stop-loss and Take-profit tools offer automated action when a trader is unable to or chooses not to watch the markets while trading. It’s true that any price trend can turn unexpectedly and taking small losses is part of the
package of trading – something new traders are often unaware of.
The trick is to decide what percentage of your investment you are willing to lose, as a level of risk, you apply to your trades. Remember, calculate the risk-to-reward ratio as accurately as possible and with consistent practice, your gains will always outweigh your losses with the correct measures in place.
Most vitally, once you have established these practices and are consistently implementing them, you will need the discipline to stick to this practice, regardless of personal feelings or emotions during any trading session.
2. Take Advantage of Technical Analysis
Guesses, hunches and superstitions have no place in CFD trading. Unfortunately, your gut is likely to let you down very fast if that’s what you are basing your trades on. You should learn how to enforce technical analysis on charts and if you are working with a knowledgeable broker, you will most likely be trading on the award-winning MetaTrader4 platform. This platform offers over 2000 free indicators that can be utilized alongside a sound technical analysis strategy.
The time spent studying and learning to use these tools and this type of strategy, will be well worth it. A trader should consider themselves a life-long student of the markets and should always make the effort to stay informed and educated on what features are available, and the ever-changing global market conditions.
To really help yourself, learn fundamental analysis and combine both into your strategies. You can never be too prepared, there are so many factors that can influence market conditions minute-by-minute.
CedarFX additionally offers their traders Margin Trading whereby certain risk-management protocols are in place. These protocols are there to protect not only the trader, but the broker as well. Ultimately, these measures try to prevent an account from being completely
liquidated in adverse market conditions. They also allow the use of Electronic Assistants or Bots; third-party trading software such as copy trading.
3. Stay Calm and Set Realistic Goals
The ‘Go Big or Go Home’ practice has no place in CFD trading either. Something you will hear every experienced trader say is ‘Don’t get emotional!’. While in many areas, deciding with your heart is admirable, in trading you need to be calculated and disciplined to really succeed – luck can only go so far.
New traders are often unaware of the importance of this rule and reading this may scare some interested parties away. Don’t be afraid, there are so many resources and tools available to learn from.
Not only this, but CedarFX offers 0% commission accounts where you can utilize your full deposit for trading. They additionally offer an endless amount of free Demo accounts, where new traders are able to practice their strategies on live market conditions without risking any capital – Demo accounts operate with fake or dummy funds.
4. Don’t Keep All Your Eggs in One Basket – Diversify Your Portfolio!
Where to Build a Diversified Portfolio? You can invest in over 150+ Forex pairs, Commodities, Cryptocurrencies, Indices, Stocks and Metals 24 hours a day, 5 days a week with CedarFX. They also offer round-the-clock Cryptocurrency trading so you may invest and manage your trades 24 hours a day, 7 days a week. Combined with the ease of device compatibility, you can conveniently trade from anywhere with an internet connection.
Why We Choose CedarFX – The World’s First Green Broker:
CedarFX is a robust and reliable broker with a conscience and a wide variety of assets to invest in. Currently they offer two excellent account options; An Eco Account and a 0% Commission Account.
0% Commission:
The first type of account is the Zero Commission Account. Traders are able to register and deposit capital without any commission charged before, during, or after trading. This means your full deposited funds are available to be traded in their entirety with no hidden fees associated anywhere. They offer same-day Bitcoin withdrawals for this account as well.
Eco Account:
The Eco Account from CedarFX is a commission-based account with an environmentally friendly feature, aimed at combatting global warming and reducing the carbon footprint of humans. The commission is charged on a pro-rata basis according to the physical trades you place. This is at a rate of $1.00 per lot traded.
For every $1 commission paid by clients, the amount is matched and used to plant trees. These funds are sent to the Eden Reforestation Project, who are responsible for planting millions of trees around the world in an attempt to neutralize human’s carbon footprint.
What Leverage does CedarFX offer on All Asset Classes?
Looking to make the most out of the least? Well, CedarFX offers some of the most competitive leverage ratios on the market. These are their unbeatable options:
Crypto – 1:100
Energy – 1:100
Forex – 1:500
Indices – 1:200
Metals – 1:500
Stocks – 1:20
CedarFX Support:
This broker’s customer support is highly impressive and efficient. Contact them via Live chat, email or call-back request 24 hours a day, 7 days a week. Their specialty trading and finance departments can handle even the most technical queries and provide detailed feedback and assistance.
