Don't Trade Too Many Markets
- Many CFD brokers offer a whole range of markets from one common platform. Before trading different markets, though, you need to familiarise yourself with the markets' opening and closing hours, currency effects and the particularities of the underlying assets that you are trading. For instance, currencies trade round-the-clock between Monday morning (Asian time) to Friday evening (U.S. time) while many commodities and indices trade very long sessions but may close periodically over the course of a trading day. In addition, if the base currency of the CFD increases against the base currency of your account your gains might be reduced by any foreign exchange fluctuation or your losses could be made worse.
- Don't trade too many markets; there are thousands of different markets and financial instruments you can trade via CFDs these days. For some, all this could be irresistible and they will open positions in loads of different instruments just because they can. I sometimes have fell into this trap myself and there have been occasions where I had far too many positions open, and whilst they are mostly good positions its difficult to keep track of them all and I tend to miss important sell or buy points and end up having bigger individual losses than I would like (of course the opposite is also true: I'm exposed to lots of gains if i get it right!).
- Sharescope (a stock screening application) has helped enormously, as has being more relaxed about taking or leaving an opportunity. But the greed - because i need to make enough to live comfortably - seems to keep me in too many positions rather than taking a quick buck (always expecting more) so i end up with all these positions open and not knowing which ones to close!!
- However as a whole, monitoring many markets at the same time is no simple feat - to trade a market successfully you need to study not only the price movements but also what makes it move (and each market has its own quirks). The better traders will intimately get to know the markets they trade and they are also aware what other markets may impact them.
- So just concentrate on a few markets that interest you or where you feel you have better information. To trade a market effectively, you need to follow not just the price action but also understand what makes it moves and its peculiarities. Research the markets you are interested in and also look at possible contributors e.g. Oil could be supply (terrorism, workers strikes, weather, seasonal demand fluctuations, reserves...etc). The best traders will know the markets they trade thoroughly; they will closely follow their movements and they know what other markets have an impact on them.
- Take into account the volatility of the market you wish to trade. This means taking into account the timeframe of the position and the typical daily trading ranges. For instance you have to allow for bigger stops for more volatile markets as otherwise you will end up being stopped out by the normal market noise (dead by a thousand stops). If you don't have sufficient funds to support a larger loss you should use decrease your trade size or deal in a less volatile market.
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