How and Why CFD Traders Fail?

It is true that the world of trading contracts-for-difference or CFD poses a lot of opportunities and advantages. However, it is also a fact that some people fail too. The sad part here is that mistakes are from the same causes most of the times. Hence, in order to avoid this, this article will expose some of the most common mistakes that many traders do why they fail. This is not to make fun out of it, but to learn the lessons underneath it or even avoid each of these.

Specifically, the top three (3) most common mistakes that many CFD traders commit are about over leveraging, market misreading and even absence of stops.

Over Leveraging

The worst thing that leverage could offer is to make a trader over trade due to over leveraging. Well, this is because traders can enter a trade even with just a minimal percentage of the asset. Hence, they do not need to have too much capital investment to make a trade. This may be an advantage, but it can also serve as a disadvantage too.

However, another problem about this is that it is quite too difficult to determine the time when we can say that it is beyond the normal. In other words, there could be various views in determining what is "over" trading or not. Hence, it seems that it is hard to judge. After all, it may also be unique for each trader, depending on their risk portfolio as well as market tolerance. Some people would say that it is also about the greedy tendency of many traders to earn as many as possible. Nevertheless, it is also debatable like the term "over" in CFD trading.

Nevertheless, I think the golden rule is to enter into something that the trader can afford. In other words, it should be within someone's financial capability. It is not acceptable to enter into various transactions just because they can be put into leverage, but the trader does not have a financial means for it in the first place.

Reading the Market Differently

Secondly, on the other hand, misreading the market is another particularly common mistake to many traders. Sometimes, it is maybe because they are referring to the wrong reading materials, or they are just missing out something. If traders miss out something, it will surely lead them to an impartial decision since they were not able to consider all the significant factors.

Absence of Stops for Protection

Further, the third, but not the least, most common mistake that many traders commit is not having stops. This is, in fact, a protection for them for over leveraging, as well as against other possibly adverse market conditions. Stops are extremely valuable because these help a trader to secure their earnings while limiting losses at the same time.

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