English
Trading Lessons for 2023 - Enhance Your CFD Trading

Trading Lessons for 2023 - Enhance Your CFD Trading

calendar 23/01/2023 - 10:13 UTC

For the captain of an airplane, no matter how much inborn intuition he may have, it would only make sense to climb aboard with him if he’s expert in all the technical workings of the aircraft. Similarly in the arena of online financial trading, you may have a knack or a talent for the activity, but, before you start opening deals, you’ll need to spend time becoming as expert as you can in the financial markets, your instruments of choice, and all the latest business news. Understandably, this will take some time and patience, so, from the outset, accept that you won’t be graduating in a single day. Besides, you wouldn’t want to trust a plane captain who has only trained for a single day, would you?

This article is designed to offer a helpful launchpad for those who may be interested in entering into financial trading, issuing warnings about common errors, both technical and psychological, and presenting a realistic picture of what to expect when you enter the financial markets. The reader is encouraged to take the following points as a springboard for further, and, in fact, ongoing research.

10 Trading Tips For 2023

Open Your Business

If you were starting your own business, you probably wouldn’t spend most of your day playing videogames and then dabble in it a couple of hours before bedtime. Rather, you would devote the bulk of your daylight hours to fostering the business, and even be willing to put in overtime while you’re still getting it going. It’s also likely you’d try to find time to expand your general knowledge of the business.

You will have to apply yourself to becoming educated about the workings of the financial markets, the factors that drive price movements in various securities, and the array of daily market news. While, of course, you should be careful not to over-stress yourself, it would be appropriate to take your online trading quite seriously. If you don’t have much time to spare, it may not be the best time for you to delve into online forex trading.

What’s the Plan?

Even when you’ve completed a course on forex trading for beginners, read lots of market analysis, and got used to scanning daily business news, you shouldn’t start trading until you formulate a clear plan. Don’t rush this process. It should be done, ideally, by physically writing down the conditions under which you will open and close a deal, the sum of money that will be set aside for your trading, and the maximum you are willing to lose in a single day. Don’t even consider borrowing funds earmarked for your children’s tuition for your financial trading.

Be ready to reformulate your plan several times as you learn from experience. Once it’s written down, feel as bound to it as you would to any other contract, irrespective of the strong, fleeting emotions you may feel when the action starts. The truth is, if you were to spontaneously take a risk and succeed through it, you would have failed. Success means faithfully following the plan under all circumstances.

Be a Student

Just like it’s part of running an international business to stay in touch with the economic trends in the countries where your business operates, it’s part of online trading to constantly educate yourself about the instruments you’re trading in. Your trading platform should provide you with the tools to continually enrich your knowledge and get live updates from the market whenever you need them. There are plenty of good resources out there to help you build your knowledge, so take advantage of them.

Even if you have already read a lot, do not view yourself as a finished product, but, rather, as a work in progress. There is a lot to learn, including, for example, advanced trading methodologies that involve technical analysis, and you need to finetune your own instincts before starting to rely on them. Why not observe a professional trader at work to see how he does things?

The Business of You

Once you get in the hang of things, you’ll notice that your own emotional reactions play a big role in guiding your trading conduct. In reality, people’s decisions are more often driven by feelings than by cold, hard facts. When traders are overcome by fear of losing money, they tend to refrain from risking as much as they should, but they also may act impetuously in order to make up for losses.

When a trade goes successfully, on the other hand, there’s the temptation to keep your position open to maximize your gains (even though your plan said otherwise). Remember: your guiding light is the plan, so tell your beating heart to settle down.

Be poised to notice the times when it’s best for you take a break. If you’re emotionally worn out, panicky, or feel you are infallible, consider taking a walk. Your own wellbeing is much more important than your forex trading career, so don’t let it be forgotten, and, besides, you’ll trade a lot better when you’re calmer.

The good news is that the emotional pitfalls you have to watch out for are well documented and fairly straightforward to recognize. Examples include loss aversion, (a disproportional fear of losing in your trades), herd instinct (the tendency to mimic the behavior of the majority of market participants), and overconfidence.

Backrest Your Strategy

When you’ve carefully developed your strategy, backtest it against historical price data to see how effective it is in determining entry and exit positions for trades. If the results aren’t good, change your strategy or abandon it completely.

Use a Demo Account

If your strategy back tests well, rather than rushing in to trade, take the time to accustom yourself to the pace of real-time trading with a virtual trading account. Watch yourself opening and closing deals and gaining in confidence for some time. Move on to real trading when your virtual trading “business” is humming along well.

Use Candlestick Charts

These are some of the most useful tools in your chest. Effectively, they give you a visual representation of the trading behavior surrounding an instrument for any given time frame. More than that, once you learn about chart patterns, you’ll be able to derive expert hints about possible future price movements.

The Doji Dragonfly chart pattern, for instance, tells traders that an upturn in prices may be due to stall and reverse. Learning to apply it properly, though, is something you’ll have to take the time to learn.

Use a Stop-Loss Order

Hardly anybody succeeds on every single trade, so you should make provisions for the eventuality that your position will fail. Setting a stop-loss will automatically exit your position for you when prices fall below a chosen level. Aside from potentially saving you from losses, it will give you peace of mind to know you have a safety net in place.

A take profit order, by contrast, automatically closes your position when prices reach a certain level, and this saves you from the temptation to let earnings compound indefinitely.

Be realistic

You shouldn’t be surprised if today’s trade turns out to be a flop. Actually, it’s totally within the scope of what’s normal, because your realistic aim is – rather than to always succeed – to make more from your successful trades than you lose through your failed trades.

Don’t be discouraged by failure but do learn from it. Was there something you did wrong somewhere along the way, or could you, perhaps, not have done any better under the circumstances?

One Step at a Time

When you start trading, do it with small sums. Only when your “business” has been running smoothly for a little while and you feel genuinely confident in your powers to gauge the market (which is not the same as feeling you are bound to succeed), should you open larger positions.

Choose your trading platform carefully. Read what other users think about it. A broker with 25 years in the business is a better option than one that just started out, because their staying power is likely a sign that they have a formula that works, and with which people are happy.

Wrapping-Up

When you launch into the online trading universe, your most valuable weapon is the willingness to learn and adjust to conditions as you find them. As long as you always feel its worthwhile to read up on a subject you’re unclear on before rushing ahead, you have something going in your favor. If you can recognize you don’t know all there is to know, the path to knowledge and potential success remains open to you.

The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.

Want to learn more about CFD trading?

Join iFOREX to get an education package and start taking advantage of market opportunities.

A beginner's e-book A beginner's e-book
$5,000 practice demo account< $5,000 practice demo account
A 12-part video course A 12-part video course
Register now