Is CFD Trading Like Gambling at the Race Track Or Casino?
When people first hear about trading Contracts for Difference it is not uncommon for gambling to be associated in the same conversation. Today we going to have a look at the opportunities that trading Contracts for Difference presents and remove the idea of gambling from your vocabulary altogether.
Do you trade CFDs like a gambler? Dominoqq
The reality is you could trade CFDs like a gambler by trading at excessive levels of leverage. If you trade your account at more than 7 to 10 times your account size then I would suggest you are gambling. This means if you had a $ 10,000 account and you took total positions of $ 70,000- $ 100,000 then you are leveraged way too high.
You see the product of CFDs is only as risky as the person who was trading the account. For example, you could trade your $ 10,000 CFD account and have total positions that do not exceed 2 to 3 times your account size and this for many would-be trading well within their means. The trick with CFDs is to start very small and build your way up.
Make sure you are trading a positive expectancy trading system
A positive expectancy trading system simply means that for every dollar you risk you expect to make that dollar back and earn a little bit more. You see the casino is very smart and they have a number of positive expectancy games that are in favor of the casino and not the person playing. This means that the longer you play at the casino the more you should expect to lose.
When it comes to trading the way to remove the gambling like nature is to ensure you have a positive expectancy trading system. This is the one element that differentiates trading from gambling at the casino or the racetrack.
Can you afford not to become the casino owner?
Over time, your goal as a trader is to develop several positive expectancy trading systems enabling you to trade different market types over different time frames enabling you to in effect be the casino owner with several casino games. This will ensure your long-term profitability and enable you to reduce your drawdown’s considerably.
Tips from taxi drivers will not suffice
Another way to identify whether your CFD trading business is gambling or not is to work out if your trading tips are coming from taxi drivers, gym instructors or next-door neighbors. If the majority of your entry signals are generated from hot tips then it’s probably a fair indication that you don’t have a trading plan.
Spend quality time developing a robust trading plan
When you first starting out it is important in any business to have a well laid out and clearly defined business plan and trading is no different. When building your CFD trading plan you need to take into account your entry, exit, risk management strategies and run through several possible contingencies that could happen.
As you can see creating success with CFDs is a result of building a sensible trading plan and ensuring you have a positive expectancy trading system.
Action: Discover the 7 most Critical CFD Trading Tips and 2 of the most common CFD Trading Strategies. Learn more about the Contracts for Difference (CFD) revolution by going.