Silly Mistakes CFD Traders Make
Trading is difficult enough without a simple mistake taking away all your hard won profits. Here are a few ideas that could save you thousands by avoiding silly mistakes.
Is it Buy, Or Sell
It is not unusual for a trader to push the wrong button when entering or exiting from a trade. It is most common to push sell to get out of a short position, when you really meant to buy. Sometimes it just gets so confusing, so instead of being out you end up with double the quantity.
This mistake is easily caught by checking in with your open positions after you place a trade to ensure that the trade you have placed did what you expected. If caught immediately this mistake is easily rectified and is likely to only cost a small sum for a stupid mistake. If you do not realise your mistake and the position is left open this can have disastrous consequences for your account.
Remember Your Stops
Often a trader will decide to exit a position at market, because they do not like the current price action. But if they have the discipline to always use stops then the stop order must be cancelled after the trade is exited. If it is left open the order can be executed and it could be many hours before you realise that this has happened. The trade may or may not go in your favour, how it plays out is an unknown, but certainly not something you want left to chance.
When it comes time to close your trading platform look at both your open positions and also check your live or working orders. Make sure there is a match between the two to ensure you are not surprised next time you go to trade.
Zeros Don't Mean Nothing
While it is possible to get the maths wrong when calculating your position size it is far more common to get the number of zeros wrong when you place the trade. An extra zero means your risk increases by a factor of 10 times and forgetting a zero reduces your profits to 1/10th.
Checking your open position after the order is placed should enable you to pick up this error as the size of the position will be very different to your normal trading size.
Tight Stops Create Losses
A very common mistake made by traders is to use very tight stop losses. If the stop order is very near to the current price it can be hit by the normal fluctuations that occur. Tightening the stop loss does not prevent losing money, it often creates it.
Stops must be placed far enough away from the price action to exit you from a position if your trade view turns out to be wrong. Give the underlying share room to move to avoid getting caught by this CFD mistake.
Follow The Rules
If you can overcome the previous CFD mistakes there is still one more that you have to master. That is your own behaviour. It is not uncommon for beginning traders to enter a share once it is climbing rapidly, but this usually has disastrous results. However it is not only new traders that get caught by this idea, with more experienced traders also falling for this simple trap.
The market offers an unlimited supply of trading opportunities, far more than you could ever possibly trade. If you miss a trade today, there will be another trade along soon enough. By following a trading plan you can avoid getting caught by impulsive trades, which can prove to be costly.
While no trader will be right every time, these silly mistakes can be easily avoided or caught before they have any real impact on your account. - 23204
Is it Buy, Or Sell
It is not unusual for a trader to push the wrong button when entering or exiting from a trade. It is most common to push sell to get out of a short position, when you really meant to buy. Sometimes it just gets so confusing, so instead of being out you end up with double the quantity.
This mistake is easily caught by checking in with your open positions after you place a trade to ensure that the trade you have placed did what you expected. If caught immediately this mistake is easily rectified and is likely to only cost a small sum for a stupid mistake. If you do not realise your mistake and the position is left open this can have disastrous consequences for your account.
Remember Your Stops
Often a trader will decide to exit a position at market, because they do not like the current price action. But if they have the discipline to always use stops then the stop order must be cancelled after the trade is exited. If it is left open the order can be executed and it could be many hours before you realise that this has happened. The trade may or may not go in your favour, how it plays out is an unknown, but certainly not something you want left to chance.
When it comes time to close your trading platform look at both your open positions and also check your live or working orders. Make sure there is a match between the two to ensure you are not surprised next time you go to trade.
Zeros Don't Mean Nothing
While it is possible to get the maths wrong when calculating your position size it is far more common to get the number of zeros wrong when you place the trade. An extra zero means your risk increases by a factor of 10 times and forgetting a zero reduces your profits to 1/10th.
Checking your open position after the order is placed should enable you to pick up this error as the size of the position will be very different to your normal trading size.
Tight Stops Create Losses
A very common mistake made by traders is to use very tight stop losses. If the stop order is very near to the current price it can be hit by the normal fluctuations that occur. Tightening the stop loss does not prevent losing money, it often creates it.
Stops must be placed far enough away from the price action to exit you from a position if your trade view turns out to be wrong. Give the underlying share room to move to avoid getting caught by this CFD mistake.
Follow The Rules
If you can overcome the previous CFD mistakes there is still one more that you have to master. That is your own behaviour. It is not uncommon for beginning traders to enter a share once it is climbing rapidly, but this usually has disastrous results. However it is not only new traders that get caught by this idea, with more experienced traders also falling for this simple trap.
The market offers an unlimited supply of trading opportunities, far more than you could ever possibly trade. If you miss a trade today, there will be another trade along soon enough. By following a trading plan you can avoid getting caught by impulsive trades, which can prove to be costly.
While no trader will be right every time, these silly mistakes can be easily avoided or caught before they have any real impact on your account. - 23204
About the Author:
Jeff Cartridge is a private trader from New Zealand and co-created the website LearnCFDs.com Discover Ways to Make Serious Money with a Small Investment CFD Trading Strategy
posted by X - Men @ 3:01 AM
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