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CFDs Trading Rules to become a better investor


  • When trading CFDs is better to control risk / reward profile for CFDs bought or sold; the decision to trade should depend on your forecasted scenario, on your market timing decision and on the liquidity of CFDs (bid – offer spreads and amounts on bid and on offer side) but all of this is subject to the amount of money you can invest also to afford to contain possible losses.

  • CFDs trade at margins and this allow you to benefit of uptrend or downtrend for a bigger invested amount but it’s usually better to invest small amounts because of the risk of losing higher portion of money than the initial margin that was necessary to deposit to the broker (CFDs provider) to buy or to sell CFDs.

  • It’s better to set a stop loss order when you open a position on CFDs; a stop loss order is a trading instruction that is activated to close your position at a certain price when CFDs price is moving against your position. You can place a stop loss order when you open  new  positions (buying or selling CFDs)  or on existing positions ( CFDs bought or sold previously) and normally you are able then to modify or to cancel the stop loss order anytime as the market moves.CFDs provider allow you using also ‘trailing’ stop loss orders to protect your profit as the market moves.

  • Let’s open and use a CFDs trading account only when you fully understand the concepts and all the risks involved in CFDs trading.

  • You sell CFDs to protect ‘to hedge’ your existing physical shares portfolio against short term price falls (see short trade example) or against a short term rally for an asset not fully represented by current asset allocation (see long trade example) but you have to monitor the market to decide about the closing out of the hedge to avoid counter CFDs price trend.

  • CFDs increase your portfolio diversification and profitability but only if you monitor your p&l (profit and loss) on a periodic basis because if you buy or sell CFDs you  are trading using leverage and this  can increase by a multiplier your portfolio profits and  losses.

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