10 Golden Rules Of CFD Trading

1. Know your market
Choose a market that you understand. This will help you to take clear views on the direction of price movements.

2. Have realistic trading targets in place
A trading plan should provide a general set of rules which you can refer to. The plan might specify things such as:
• Profit goals (per day, month, year)
• Maximum losses you are prepared to take
• Size of the trade at any one time
• Entry/exit point
Without a set of rules, emotions such as greed, fear and hope may take over and lead you to make irrational decisions. Of course, as you become more confident, these rules can be changed and adapted to any new strategy you may wish to adopt.

3. Don't overtrade
Trade within your financial means. Don't use up your entire margin up with a single opening trade and always have extra margin to cover your position should it go against you.

4. Cut your losses
In a losing situation it is easy to let losses accumulate in the hope that prices will turn around. By getting out of loss making positions early, you will avoid losses getting too large.

5. Use closing orders (stop losses) to manage your risk You can place closing orders (stop losses) on trades both online and over the telephone to help minimise your losses.

6. Expect losses
Even the best traders in the world get it wrong. Analyse your losing trades and learn from your mistakes. Don't get emotionally attached to your trades.

7. Be disciplined
Do not let emotion take over - stick to your rules. Consider the appropriate levels to take profit and losses.

8. Don't put all your eggs in one basket Trade a variety of markets to spread your risk.

9. Don't trade on rumours
Have your own opinion about every trade so that when you are ready to trade you will be confident that you have taken a value and considered view.

10. Keep informed and up-to-date
Make use of all the resources available to you to maximise your understanding of the markets. The City Index Internet Trading Platform is constantly updated to give you the latest news and information from well respected news providers.

34 ISSUE 8 INVEST APR/MAY 09