Trading is one of the most exciting and stressful ways to make money. This can be unpredictable, risky and volatile, but quite profitable when done right. That’s why pre-trading prep is a must! Before getting into any trade make sure you prepare yourself and everything necessary.
There are several kinds of trades to choose from such as forex, commodities, metals, indices, stocks, bonds, shares, digital currency and more. You can even enjoy all that through CFD trading.
CFD stands for Contract of Difference. This is a kind of trade that allows traders to speculate on the future value of an asset. And in CFD, you only own a portion of an asset and also don’t own its physical form.
Although the concept of CFD trading is pretty simple, this can be quite complex and tedious once you’re trading. This is taken more by seasoned traders but also welcomes newbies from time to time.
Not a lot makes it out alive in CFD trading, that’s why before getting into this exchange, prep! To help you start, down below is a list of ways to prepare yourself and survive CFD trading:
1. Know what strategy works best for you.
Throughout the years, traders have found strategies to trade whether you prefer short-termed trades, long-termed trades, big trades and even small trades. Each strategy works differently and depending on what suits you, the effectiveness of each strategy may vary. To know what kind of trading strategy works best for you, you need to know what they are.
What are the 4 kinds of trading strategies?
There are various kinds of strategies surrounding the trading market, but all originate from the 4 main kinds which are day trading, swing trading, position trading and scalping. To better understand how these strategies work, here’s a rundown of each one:
- Day trading – This is known to be the second most short-termed trading strategy. As a day trader, you open a handful of trades each day and hold them for hours. You profit from market movements, even the smallest ones, and at the end of the day, you’ve either gained or lost.
- Swing trading – This trading strategy profits from market trends. As a swing trader, you open and hold trades for more than a day or so and follow a set of rules based on fundamental analysis. Once a market trend breaks, that’s when swing traders come out to play.
- Position trading – This is a long-term trading strategy and is somewhat of an investment strategy where a trader buys and holds a trade. As a position trader, you based your speculations using long-term charts and techniques. Position trading can take days, weeks and even months.
- Scalping – This is the quickest strategy on the list and is done by ‘active’ traders. This trade can take more or less than 5 minutes. As a scalper, you profit from small market movements in relatively liquid markets. This is the opposite of swing trading, this strategy works best on quiet markets.
2. Practice your chosen trading strategy
Once you find a strategy you like, practice it. One of the best ways to do so is by using a demo account. Most trading platforms provide subscribers with an option to use a demo account feature. This feature will allow you to use trading tools, charts and so much more.
A demo account allows you to experience what an actual trade will be like. This is a great alternative to practice since you don’t need to risk money when learning. Plus this allows you to spot trading mistakes early on, learn from them and know how to prevent them.
Who offers the best demo trading accounts?
When practising, choose to do it with the best! There are several trading platforms today that provide quality demo accounts, some of which offer more features than others. To know what the best ones are, here’s a list to consider:
- eToro – This trading platform is considered to be the most recommended by both beginners and tenured traders. It’s simple, offers quality features and has a great interface.
- AvaTrade – This trading platform is known to be great for beginners. This offers various kinds of trading tools and creating an account is a piece of the cake. Plus this offers quick tutorials to help you get started.
- Skilling – This trading platform boasts a range of account types and is deemed to be user-friendly, beginner-friendly and easy to sign-up for a demo account. It only asks for your email address and poof! You’re in.
- com – This trading platform is known for its award-winning stock app. Its demo accounts are said to be flexible, easy to use and utilize an AI to pick up your trading strategy and behaviour.
- Plus500 – This trading platform offers a standard demo account similar to the rest but what sets it apart is its wide range of technical analysis options. This is ideal for practising and is also easy to set up and use.
3. Diversify your portfolio
As soon as you get the hang of trading, you can now choose a trade to get into. Whatever trade you choose to start with doesn’t necessarily mean it’s the trade you ‘have to’ stick to. It’s ideal to diversify your portfolio and try out different trades.
Exploring other trades is a great way to find your niche! Plus this can also open more opportunities for you to profit from. But remember, only take on many trades as you can handle.