If you have ever thought of making money staying at home, the idea of online CFDs trading must have crossed your mind. And while some say it’s a good way to earn, many more traders are reported to lose their money. Maybe those sharing their success stories now are on their way to fail right now. How can you not repeat their mistakes? Here are some tools you can apply to prevent catastrophic losses and keep the process under control.
If you know you will not be able to cover your losses after the price of a certain asset reaches some value, you can set a stop loss order that closes the position automatically when the value is reached. It will result in a loss, of course, but this is a loss you can endure. Stop loss orders are the first tool you should use to keep your risks under control.
It’s probably the most popular and the most efficient way of managing risks: keep opposite positions active (that’s what’s called hedging). No matter where the price goes, what you lose on one position you regain on the other. Hedging is a versatile tool for minimizing risks. Its weakness is that it prevents you from profits as well. So if you want to make money, you will have to unhedge some of your positions. Which? It depends on your knowledge of the situation, your intuition, and your willingness to risk.
While leveraging is a great tool that makes you operate larger amounts with fewer investments, it will (if things go wrong) drag you into bigger losses than you can afford. Okay, if you have learned your stop loss lesson, it will be just the loss you can afford – but still a big loss.
What can you do to prevent this? First: don’t misuse leverages. Multiplying your deposit, keep in mind that your losses can be multiplied just as much. Second: choose brokers that don’t offer sky high leverages. In most civilized countries, this is the subject of regulations, and maximum leverages are limited by authorities controlling the industry.
Is there a greater risk than losing your money? Yes, it’s losing your head because of loss of money. It’s easy with CFD trading, as margin calls or lost opportunities may knock at your door at any moment. Just admit that you have been wrong, but life goes on. Maybe you are just not about trading, and minimizing losses means quitting. It’s no sentence: it’s a result of learning. And… if you have these doubts, don’t risk more money than you would have taken to a casino to leave it all there.
Treat this like gambling, we said? Partly yes, if you’re in it for fun. But if your intention is making money, you better take this seriously. Track the news, accept the signals, learn to interpret them right. The more consciously you take the business, the more of a business and the less gambling it is. So give it time and effort, and this will pay.
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