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Due to the unbeatable popularity of the CFD market, a great number of investors are joining the trading industry every day. But you should keep in mind that jumping into CFD trading without having any prior knowledge can be extremely harmful to beginners.
Generally, newbies come to this marketplace to make some easy profit without understanding the market reality.
When someone goes to execute trades without practicing beforehand, they will make some avoidable mistakes. Today, we will discuss the common mistakes in CFD trading, which must be avoided at any cost.
Broker
Choosing the wrong broker can destroy the career of an investor. You should be careful of the fact that a trader who is very careless with the selection of the right broker can fail in the long run.
Before choosing the broker, one must go to their website and check in the footer area about the necessary certification. If we find that we can assume that they are honest, we can continue our business with them.
Sometimes it is found that fake brokers exploit beginners by taking their credit card information. To avoid this type of incident, you must check the necessary certification and the standing of a broker within the financial community.
Demo Account
A demo account helps you to get practical experience, but beginners are very reluctant to use it. A demo account has all the facilities of a live account, but you must be conscious of the fact that action taken here does not affect their trading account balance. Fake currencies are used here, and a trader does not have to take responsibility for the loss and profit when using a demo account.
To learn the basics, you can use Saxo broker and develop your skills slowly. This will allow you to trade in a professional way and you will eventually become successful at trading.
Leverage
A leverage option works great to trade with a low deposit, but you must be careful of the fact that he must not use a great amount of leverage. Having too much leverage can increase the risk factors to a great extent.
Generally, a trader may get 1:10 leverage power from the broker, but it may vary according to the ability of the specific brokers. It indicates that if someone deposits $10, he may get $100 of investment facility using the leverage.
But beginners should be conscious of the utilization of the tool as it may work as a two-edged sword. A trader should remember that they take leverage as a loan from the broker, and he must have to repay it later. If too much leverage is taken, the account of the trader may take the negative value. Sometimes, it is found that the trading account gets deleted because the balance has been zero for a long time.
Stop-Loss Point
You must set the stop loss point, which can save a trade from making a great loss in a bearish market. Most beginners do not use an automation tool like this, which make their trades vulnerable.
Experts use the stop loss point as a safeguard and place it in a downward position, not far from the moving average.
Take Profit
With conscious thought, we all may guess how much profit we could make from our trades. According to our logical expectations, we should set a take profit point which may help us to close our trades automatically when our expected goals are achieved.
In conclusion, it can be inferred that during the execution of trades, you may make different kinds of mistakes. If these happen, you must note them down to take actions to prevent yourself from repeating them in the future. So, maintain a trading journal and review it regularly.
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