Can you really make money with CFD trading – Find Out

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Trading Education, Free Demo Account!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Good Broker. Only For Experienced Traders!

Barefoot Investor

Why on earth would anyone want to trade financial products that could potentially wipe you out? This is why.

I went out to the flicks the other night to see The King’s Speech. Great movie – horrible pre-show entertainment.

No sooner had I popped down my popcorn and settled into my seat than an ad touting the latest investment fad, Contracts for Difference (CFDs), came on.

The slick ad looked liked a movie: fast-moving shots of city skylines, goldmines, and wealthy dudes doing wealthy dude stuff. It even had its very own Hollywood-style voiceover man.

He seemed to be suggesting that, because everyday news events tend to impact financial markets, the choctop-chomping suburbanites sitting with me in the cinema could profit from these events by trading highly speculative derivative contracts.

Talk about a horror movie.

What are CFDs?

If you’re trying to piece together what the hell a CFD is, you’re perhaps one of the lucky ones. CFDs essentially allow you to make highly leveraged bets on which way a share price (or the price of gold, currencies, or two flies crawling up a wall) will move in the short term.

You only have to come up with an initial margin (think of it like a deposit) of 5 per cent of the value of the share, but the CFD gives you exposure to 100 per cent of the price movement. If the share price moves the wrong way, you can be potentially exposed to unlimited losses.

One of the best descriptions of CFDs I’ve heard comes from none other than ASIC Commissioner Greg Medcraft, who said ‘they’re basically a way to borrow to gamble’.

CFDs aren’t allowed in some countries because they’re too risky, and earlier this month the Financial Ombudsman Service called for investors to be banned from trading CFDs unless they can prove they understand these highly complex derivatives.

However, writing about CFD providers is fraught with peril. They’re the financial services’ equivalent of Scientologists: rich, powerful, and not afraid to throw around their influence.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Trading Education, Free Demo Account!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Good Broker. Only For Experienced Traders!

‘How I Lost $500k’

One of the best descriptions of CFDs I’ve heard comes from none other than ASIC Commissioner Greg Medcraft, who said ‘they’re basically a way to borrow to gamble’.

So with that let me introduce you to John*, a 31-year-old bloke from Melbourne who thought he’d give trading a go. I spoke to him this week.

Why on earth would anyone want to trade financial products that could potentially wipe you out? Here was John’s thinking:

If he invested $10,000 of his savings into the share market and it went up 10 per cent he’d make $1,000. Big deal.

If he invested $10,000 of his savings into CFDs and it went up 10 per cent he’d make $10,000. Big deal!

John was completely out of his depth. He didn’t realise that trading is like a game of tennis – you need to know who your opponent is.

The people he was playing against were in many instances the big financial institutions, like Citibank, Goldman Sachs, Barclays, HSBC and CBA. These institutions’ employees aren’t so much traders as risk managers – people with advanced degrees in mathematics, years of training, sophisticated financial models, and collaborative trading offices all around the world.

“I was trading the price of gold, oil, the ASX 200 and currencies”, said John. “All the action happens overnight in America, while you’re asleep – or trying to sleep.”

“I did okay at the start, but I didn’t really know what I was doing. For me, all too often I’d get this kind of overriding, heart-racing moment where I thought things are going to turn around.”

“So I’d go deeper, and deeper … while the market kept going the wrong way. Too many times I woke up to find out I’d received an automated margin call email (to top up his trading account because of losses) from my CFD provider.”

Barefoot: “Wait, wait, wait … how many times did that happen?”

John: “Oh gosh, I reckon about 25 times … I think I lost about $250,000.”

It gets worse.

“My trading strategy didn’t involve stop-losses (a risk-strategy that automatically exits your position at a predetermined price, so you ‘stop the loss’). I didn’t see the point, because in many cases with a stop loss you’d get sold out at a loss, and then the market would move back and you would have ended up making money.”

But that didn’t happen one Friday night a few months ago.

“When I went to bed I didn’t realise that the market was having one of its ‘corrections’. I woke up in the morning and checked my account. I’d received multiple margin calls overnight that had gone unanswered, so my CFD provider sold my positions out.”

“I stared at my computer screen. I had just lost a further $250,000. In one day.”

“It wasn’t like I’d bought $250,000 worth of shares and they’d gone down to zero. I never had that money in the first place. And now I had a few days to come up with $250,000 to cover my side of the trade.”

Luckily John could afford to lose $500,000. He’s a successful financial advisor.

Make money on CFD trading in a simple way

In this CFD tutorial I am going to explain on how you can make money with CFD trading.Now if you don’t know what a cfd is then you should read this article: What are CFDs?

The possibility that cfd trading gives to a trader

One of the reason that I like CFD trading so much is that it gives you so much possibilities to trade. You can use cfd trading to make a trade in forex, shares/stocks all over the world, top Indices, commodities and all kinds of funds. For example if you don’t see any opportunities to make money in the FTSE then you can always look to the German market and see if Volkswagen share fits your requirement to make a decent profit. Or you can trade in gold by using cfd trading if you believe that gold market gives a good opportunity to make a profit.

CFD Trading Step 1

The first thing you need in CFD trading is CFD broker. Its vital that you choose a good cfd broker. Because unfortunately there are still some brokers around that are scam. To avoid off getting a scam broker, you should take a broker that has licenses from Financial Authorities. In our brokers review you will find what our experiences are with different brokers. Our top picks at the moment are Plus500 and Markets.com. You can the reviews here: Plus500 Review & Markets.com Review.

CFD Trading Step 2

After you have open a CFD trading account or if you already have one then it is time to make some profit. Here is the first thing that you should do. Create a trading plan. A trading plan is a simple plan where it states why you want invest or trade in this object and at which price point you should get in or get out. One of the best way of determine a buying point is to use make use of the horizontal lines and trend lines. By using both U can pinpoint the price point where you should enter the market (buy the object) or leave the market (selling the object). If you want to know more about buying signales and selling signales then read this article: buying & selling signals.

Protect the down size risk

Have you ever heard of the first two rules of Warren Buffet in investing?

Rule nr.2: Never forget rule number One!

I love that rule. That’s why I always use a stop loss order to limit my potential loss.

cfd trading limit potential loss

By using a stop loss order, I am in control of my risk management. Meaning that I can control my potential losses and keep it small when the trading doesn’t work out well. And when it works out well I can make a huge profit while my loss is small.

A CFD trading making money extra tip: Use a stop loss order to protect your profit.

A stop loss order is used to keep you from losing money but it can also be used to secure your profit. Let’s you say your current trade is making a profit. Then all you need to do is to move up the stop loss order.

Let’s say the stock that you have bought at 20 pounds currently has a value of 35 pounds. The best thing to do now is to move the stop loss order to a price of 33 pounds. This way if the stock suddenly drops in price to 25 pounds, you will still have a profit of 13 pounds instead of 5 small pounds. If you have bought the stock with cfd then you profit will be a lot bigger then 13 pounds per share because of the leverage.

How I’m making money with Plus500

Plus500 is one of the worlds most popular online brokers. Through Plus500 you can trade stock cfds, forex, commodities and cryptocurrencies.

But can you actually make a profit? Here’s my guide to making money on Plus500. Read on to find out more…

Update for 2020: I no longer recommend Plus500. If you’re looking for a less risky alternative you should try this platform. I’ve had much more success with it over the past couple of years.

How to Make Money with Plus500

Plus500 allows you to trade currencies (forex), commodities (like Gold and Oil) and other CFD’s like stocks such as Apple or Google.

So before you start thinking about making money on plus500 you need to first have a strong understanding of financial markets. Wild guesses will just result in you losing money.

You’ll make money on Plus500 by opening either Buy or Sell positions. A buy (long) position, if you think the asset will rise in value or a sell (short) position, if you think it will lose value. To figure out how to make these trades, will require experience. Luckily plus500 offers a free demo account. So you can practice trading with pretend money. This way you can get to grips with the interface and gain valuable trading experience.

Who is Plus500 For

I think Plus500 is for intermediate to experienced traders. If you’ve tried other FX platforms and are looking for a better interface then Plus500 is for you. If you’re looking for a platform that has what I believe is one of the largest ranges of financial products to invest in, then Plus500 is definitely for you.

I no longer use eToro and would recommend eToro instead.

A Very Generous Welcome Bonus

Plus500 gives you a welcome bonus of $30 to start trading! No catch. Just sign up, make sure you’re account is verified and you can start trading with it. There is no deposit required.

Webtrader. No Download Required

Plus500 has a very easy to use web trading interface. You don’t need to download any software. It just works. There are downloadable versions of the trading app. Including for mobile. But I’ve always found the web trading interface to work best.

A Forex Platform that Accepts PayPal!

I use PayPal a lot. And always like to use it for my trading accounts. Mainly because it’s instant and there is no waiting like a bank account. Plus500 accepts PayPal as well as all the other usual funding options. As PayPal is quite strict with financial companies, seeing a forex platform accept paypal is always a good indication.

Tried Binary Options? Use Plus500 Instead

I’m not a huge fan of binary options. I think there is too much risk involved. With Plus500 you can still make bets on the market going up or down just like with Binary Options, but your positions won’t suddenly close. You can keep your positions open to counter any fluctuations in the market.

But if you do really want to trade options, don’t worry – you can on Plus500. Yes thats right, as well as all the other countless financial products they offer, you will find options available as well.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Trading Education, Free Demo Account!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Good Broker. Only For Experienced Traders!

Like this post? Please share to your friends:
Binary Options Guide For Beginners
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: