- Avoid the temptation to overtrade. Traders who do not have a clear pre-determined strategy are more exposed to this risk. Sometimes, the best strategy is not to trade and sit on the sidelines.
- Before you do anything, work out how often you are likely to trade (you should be able to derive some idea by looking at your aims) and how much bid/ask you are likely to cross. if you trade frequently, the biggest hurdle you will face is making more money than you pay away in bid/ask, most people don’t want to face this fact.
- Pay close attention to managing your existing CFD trades – don’t just focus on opening new trades.
- Big wins can lead to overconfidence so make sure to stick to your own rules. When I started, I lost substantial sums of monies disregarding my own rules.
- You may be tempted to open multiple trades. This is okay if you have sufficient money on deposit, but if you don’t you may find yourself being stopped out on margin as your losses mount. Be warned that if your deposit money doesn’t cover your potential losses all your running positions may be closed – and you lose.
- Don’t trade at full margin capacity just because you have available margin. Each trade should be carefully considered within preset risk parameters.
- Do not trade with money that you cannot afford to lose.
The Dangers of Overtrading
