The market is full of emotions. Sometimes they are reasonable, sometimes bad. But whatever the case may be, one thing you should never forget is easy to come, easy to go. For tips from Saxo, visit the site.
#1 Entry Rules – HFT vs CPS
CFDs are derivative instruments that have mirrored the movements of an underlying instrument. So if you want to trade gold, then CFD will help you do that by displaying all the movements of gold as a mirror, but your trading software is technically not touching any physical gold. Sometimes one buys or sells a lot of contracts almost simultaneously.
In such cases, if someone has been taking max profits from these trades every day and suddenly a few days down the line holds on to his earnings without booking profits, he might end up making even more losses since he is locking in losses already created against him by another person who booked them early.
The best solution for this kind of problem is using CPS (Candlesticks Patterns). It is a very effective way of knowing when the price value will cross a particular level and thus enter accordingly. One should always use CPS over HFT (High-Frequency Trading) because CPS contains a lot more information that helps you get better entry levels, whereas CFD only provides price movement in the market.
#2 Entry Rules – Watching Movies /Stories
In trading, everyone has their unique system of making profits. In my case, I believe in watching movies/stories to learn from them and make my decisions based on what they tell me. For example, there was once in my life when I had lost so much money in trading that I vowed never to go near the market again. Some days later, I watched a Bollywood movie where one guy’s entire family depends on him for their wellbeing. He loses all his money in gambling, but he wins back everything with the help of another friend and saves his family from an enormous amount of debt. After this, even though he knows very well that he can’t go near gambling again, he ends up losing it all once more because, although he has learnt his lesson, there is no guarantee that it will work out next time.
This movie taught me not to trade anymore after so much loss, but even if I do, to try my best every day not to make the same mistake twice. So now, when I enter trades, I always think about this movie every time instead of just buying and selling.
#3 Entry Rules – Don’t Enter When You’re Angry or Frustrated
It is something everyone needs to remember, not just CFD traders. Sometimes one enters trades with a lot of adrenaline rushing through their veins because they want to make money so badly that they lose all sense of rationality. They end up taking trades that are not even worth it at all because, for them, profits are far more important than reason. So how does one avoid this kind of situation? Simple answer: by keeping calm. Even after having made so many mistakes in life, if people watch themselves closely, they will know that it is humanly impossible to keep calm in every situation. But for trading, there is a solution: it’s called stop loss. When you enter a trade, even if your heart screams to take profits, don’t do it. Instead, put a stop to loss and wait till the price reaches that point before exiting.
#4 Entry Rules – Buy Low Sell High and Never Re-Enter Trades
Before entering any trades, one must always keep in mind the simple rule of buying low and selling high. No matter what happens, never re-enter trades. Even if you had not caught the lowest possible price of the day because of some work or anything else, just let go of those losses and move on because by re-entering trades, what will happen is that someone will end up selling to you at that higher price, anyway. Thus re-entry takes away the advantage of catching the lowest possible prices.