All you need to do is understand simple but effective strategies to establish a sturdy and growing equity curve with least drawdown. If you are looking to get a solid foundation that will weather all market conditions, here are 5 tips when trading CFDs.
- Establish clearly defined and realistic trading goals
Whether it is at an advanced stage of trading or just starting out, it is important for the trader to have clear goals on what is to be achieved from the trade. These goals could be short-term or long-term; however, it is advisable to have long-term goals broken down into small short-term targets especially at the beginning.
When starting out CFD trading, an almost automatic goal is to keep the account intact and remain in the trade for the first year. Survival is very important especially if you intend to make a sustainable earning from trading CFDs.Write the goals down so that they can serve as a guide while plotting the trading path. Identify what you want and focus on it every day.
It will also help in killing all the distractions such as doubling up or selling off prematurely. They should also include the number of hours to be spent on trading and the times that are most appropriate. Also, touch on important trading aspects such as leverage strategy and levels.
- Prepare a proper trading plan
Just like any other business, it is important to have a plan for the CFD trading. It does not matter if you are a mechanical system or discretionary trader, a sensible plan with proper strategies must be in place. Some of the areas that the plan should address are entry, money management, risk management, in profit stop loss and record keeping strategies. When looking for an entry strategy, test several set ups and then select the one that works.
A money management strategy will guide on how much capital will be put in and if any leverage will be required. A risk management strategy is important in the trading plan to guide the level of risk to allocate to each trade. For instance, for a new trader, the target can be to leverage by about 3 times the current stock level before the end of the first year.
- Keep a CFD trading journal
When in profit, it is important to identify a Stop Loss such as a trailing stop loss. Then keep a record of all the trading statistics for every day. It is actually important to keep a CFD trading journal as a record of reasons for entering or exiting a trade. In the journal, record what was bought or sold and whether it was at a profit or loss, time of the trade, reasons for the trade such as technical, fundamental or tip and a chart to show proposed entry, stop and profit target. This way, it is easy to track progress and market dynamics without forgetting or leaving out anything.
- Avoid trading on impulse or acting on gut feeling
It is actually common for traders to say that they have a gut feeling that stocks from a particular company will go up or fall. Sometimes it may yield results, but in the long run it is too risky to base trading on a gut feeling because it reduces trading to a game of gambling. Often, novice traders look at the chart and decide that the price is at its lowest and cannot go any worse. They then decide to go long – buy because in their opinion the price cannot go any lower.
Such mistakes can be quite costly because of placing a bet against the trend without evidence that there will be a change. It is important that the trader has a reason for a trade and not act on impulse. Long-term and remarkable success in CFD trading can only be attained through brand and market research, together with industry knowledge on future predictions on the performance of a given sector.
Diversification is one of the most effective strategies for risk mitigation. CFD trading allows traders to engage in different industries to their advantage. Multiple pots in different industries will help you mitigate risks in one industry with gains in another.
When stock in one industry goes down, it is highly likely that other stocks in the same sector will go the same path. In the case of a major hit to your portfolio, diversified portfolio allows you to keep stocks from other industries. When it comes to diversification, it is not just about the industries that you are trading in. It is also about the market analysis strategies.
Do not rely on either fundamental or technical analysis; instead, combine the two for a fresh market approach. For instance, CMC Markets recommends using fundamental analysis to trigger a trade and then applying technical analysis for market entry and execution.
These 5 tips when trading CFDs will guide you to a successful investment curve for your future retirement whether you a new entrant or an established trader.
Can taking a step back from your business actually help you to move forward? For many entrepreneurs, taking a break from their company and using the time to make some major decisions is the best way to develop both their own career and their business. Each year, major life decisions are made – both business-related and personal – which can be shaped by taking the time to step away from your business to try to get a clearer perspective.
If you think that you’re too busy to take a break away from your business, you’re mistaken. In fact, your ‘busyness’ is one of your business’ worst enemies. Looking at taking time off in order to advance your business isn’t the same as taking a vacation, this is actually investing time in your business by stepping away from the office in order to gain perspective. The entire purpose of stepping away from your business in order to help it develop is to intentionally get away from the daily routine and develop a fresher, clearer perspective on the steps that you need to take to keep your business on track. You can discover more about alternative methods of growing your business with lean six sigma training.
You might be thinking that taking a weekend, week or even a month away from your business is too expensive to even consider, but the truth is, it may well be something that you can’t afford not to do. Can you really afford for your business to get stuck in a rut, or not be able to get a new perspective on things? The real cost here isn’t taking time to step away and advance – it’s what’s at stake if you don’t. When it comes to innovation and development for your business, if you are standing still when your competition is not, you’re essentially going backwards. Don’t view taking time away as an expense – instead, it is a necessary investment.
Fear of Missing Out
Fear of missing out – it’s not just something that millennials these days suffer from by being constantly glued to their smartphones and other devices in order to make sure that they don’t miss out on the next big thing on social media. No, it’s also something that business owners experience too – except for it’s not social media, it’s e-mails, memos, voicemails and letters. However, although it’s often important for business owners to be connected, sometimes it’s essential to step away and take a break in order to get a better perspective. If you’ve ever had a great idea come to you whilst you were doing something such as taking a bath or going for a run, you’ll understand that there’s no need to be constantly glued to your work laptop in order to come up with a new perspective and fresh ideas.
You might think that taking time away from your business is going to have the opposite effect, but the truth is, making the effort to step away from your daily routine can help you to come up with a better perspective and outlook.
Footloose and fancy-free
What makes the retirement years the right time to buy a dream car? Well, by this time, kids have flown the nest and have had families of their own, homes have been paid for, and expensive exotic vacations are not as desirable as they once were. This means that a person or couple of retirement age suddenly have a lot of money to play with. That being said, dream cars are often at the high end of the market, which means that savings may not quite cover the cost. However, do not despair as there are avenues that you can go down to purchase your dream car, such as taking out auto loans in Ontario, which are easy to apply for and are quick to be approved. You could also apply to a bank for a loan or see if a dealer offers a particular hire purchase plan. Alternatively, you may prefer to buy your dream car outright, which will require some careful planning on your part.
It is also important, particularly at the planning stage, to appreciate that the purchase price of the car is not all you will have to spend; other costs will almost certainly be involved. This may include a delivery charge to the car dealer, government stamp duty, and a luxury car tax if your dream car is very expensive. Then you will also need to factor in the running costs – gasoline, regular servicing, car insurance, and registration. You should also be mindful of the unforeseeable costs, such as repairs.
The first rule when it comes to buying your dream car is to accept no compromises. You have had an image in your head for a long time of what your perfect car looks like, and to compromise on this image, whether because of cost, availability, etc., will inevitably leave you disappointed. Never make do with second best.
The second rule is to go with your gut. It is likely that many people will voice an opinion as to the type of car you should buy, what features to include, what color it should be, but what may be one person’s perfect car is not yours. They may prefer practicality over style, bold colors over muted. You know what your dream car looks like, so do not pay attention to other people.
Your retirement years are the perfect time to finally indulge your dream of owning the perfect car. Just ensure that you choose the right payment plan for the purchase and put enough money aside for its maintenance to keep it looking as good as you always imagined it.
First of all, the myth that you can always work. Okay, this may be technically true. Now that you’re getting on in your years, you may be dreading the idea that you’re going to have to leave work. Aside from the income, work keeps up your physical and mental health, and gives you a reason to get up in the morning. However, there are a few factors which you won’t be able to predict, and may throw your plans into the air. Your health could deteriorate in the future, your company could have a big lay-off, or you may need to take time off to care for your spouse. If you want to carry on working, then go ahead. Just don’t make it an essential staple to your financial plans.
Another common myth is that you should focus on paying off your mortgage. I know that paying off debt sounds like it could never be a bad thing, and in most cases it isn’t. However, you may find yourself in a situation where paying off your mortgage isn’t the best move. Okay, paying off your home can give you some peace of mind, but it may not be the best financial decision you could make. It all depends on the interest on your home loan. It may be a better decision to call a real estate agent, downsize, and then invest your capital in something that has a higher yield. Of course, sometimes the decision is more emotional than financial. If you want to hold onto a home that means a lot to you, then forget the money!
Another myth which you may have created yourself is that you need (x) amount of money per year to have a comfortable retirement. A lot of people start doing their retirement maths far too early. They calculate they’ll need (x) per year, then set out a plan to put their current capital into safe investments, and have that money by the time they retire. You have to bear in mind that this will all be based on the value of the dollar today. Inflation rates are notoriously unpredictable. The further away your retirement is, the more danger there is in this kind of approach. I know that planning your personal finances may be dreary, but you need to keep re-visiting your retirement plans as you get closer and closer. This will ensure that they don’t come back to bite you when you finally quit your job.
If you’ve been believing any of these myths, then it may be time to re-visit your retirement plans. Do some deeper research, and the best plan will form more naturally.
Buying a property is not cheap. There are many expenses to consider along the way, not least the cost of financing the purchase. Conventional loans are perfect for homeowners, but you will need to look at specialist products if you are buying to let or renovate. There are lenders out there who cater for the buy to let and investment market, so approach a few and see what their lending criteria are.
What are Your Reasons for Buying?
Think carefully about why you want to buy an investment property. Some people buy to let, so they can enjoy a regular income as well as capital gains. Others buy with a view to renovating the property and selling it on for a profit. Before you buy, make sure you know which hat you want to wear, as this will affect the type of property you buy.
Know Your Budget
Have a clear budget in mind before you start looking at property investment. There is no point in scrimping and scraping to buy an investment property if you can barely afford to pay your current mortgage.
Once you know how much you can afford to spend on a property, do not be tempted to exceed your budget and always keep a reserve fund in place to cover any unexpected expenses that could arise. Remember, buying property is not cheap, as there are many costs involved. Be sure to budget for these costs before you begin viewing properties.
Know Your Target Tenant
If you plan on letting out your investment property, think about the type of person you hope to attract. It is pointless looking at properties unless you know who your target tenant is.
For example, if you decide to buy an investment property in a tourist location, with a view to letting it out to people on vacation, then this will have a major impact on the areas you look at and the type of property you end up buying. After all, tourists will prefer staying close to the beach in a seaside town, so they will be less interested in a flat several miles inland.
Other target groups to consider include young professionals, families and low-income tenants. Each group has its pros and cons, so think carefully about which one you want to target.
Look in the Right Neighborhood
As we have already mentioned, buying a property in the right neighborhood could make a big difference to your income.
Properties in poor neighborhoods are cheaper, but they come with their own set of problems. Crime rates will be higher and capital gains will be lower when you eventually decide to sell.
If you don’t know the local area, talk to real estate agents and take advantage of their local knowledge. They will be able to advise you on the best places to look, as well as the neighborhoods popular with tenants. For example, if you are considering buying a property with a view to letting it out to students, it makes sense to look for properties near colleges, but not all areas will appeal to students, so find out more before you commit to buying.
Look at the news to see if there any major changes on the cards. New transport links, new employers moving to an area will all affect property prices and desirability. If you can buy a property before the neighborhood has moved up a notch, you could make a decent profit.
Look for the Right Property Type
Property type matters a lot of you want to let to tenants. Families will want larger homes with gardens and schools nearby whereas young professionals will probably prefer modern properties close to local transport links.
There is a lot to think about when buying an investment property, so don’t rush into anything. Talk to other investors and take advantage of their experience. This should prevent you from making too many expensive mistakes.