Independent Investor has asked traders looking to improve their consistency to exercise discipline in deciding how to trade, to maximise profits on rising positions and cut losses early to avoid capital decay.
With substantial leverage built in to the DNA of a CFD transaction, the need to allow profits to run is ever important, as a means of offsetting the more significant losses from negative positions to deliver an aggregate profit. Likewise, traders need to be especially proactive in cutting losses, to minimise the decay of trading profits and capital.
It is discipline in trading to this strategy that provides traders with a better chance of succeeding with CFDs, taking into account the significant impact leverage can have on increasing the risk profile.
Discipline was the cornerstone of a successful CFD trading strategy, and one of the most critical facets of a consistent, profitable trading approach.
With CFD trading, you get high risk, high return investment. With margin requirements often around 5%, the leverage built in to every CFD transaction is massive, and it can bring significant returns over a short period of time when traded successfully. That said, high leverage also works heavily against you when the markets turn, and so it pays to keep a handle on your losses while allowing your profits to run if you want to succeed as a CFD trader.
At Independent Investor, we’re urging traders to adhere rigidly to the doctrine of cutting losses and running on profits, and to have the discipline to see the strategy through over time. This is the key to succeeding as a CFD trader. While some positions will always win and some will always lose, only a disciplined approach to managing your trading account will yield aggregate positive results long-term, by offsetting minimal losses with maximised profits.