Finance

3 Golden Ways To Prevent Overtrading In CFD Market

author-img By Mashum Mollah 5 Mins Read December 9, 2021 Last Updated on: September 14th, 2024

CFD market

Whenever you are trading CFDs, there’s no doubt that you will enter several trades to find just the right moment. So the chances are that you have at least one position open in the CFD market.

However, if this becomes too much of a habit for extended periods, it can lead to over-trading, which no trader wants to do. While it’s easy enough to slip up once or twice by accident, receiving an email notification opens the door for mistakes each time.

3 Golden Rules To Prevent Overtrading In CFD Market

3 Golden Rules To Prevent Overtrading In CFD Market

Avoiding the CFD market over-trading can be achieved and, if not avoided altogether, then significantly minimized. To do this requires discipline and patience, but it is well worth it when it results in your overall profits increasing each month.

The last advice on preventing over-trading relates to anything mentioned here. It means setting up an automated rule or email notification cut-off point. Either option will help minimize risk to your capital, which should be the priority if you are trading on margin.

Here are the three golden rules to prevent the overtrading of the CFD market.

1. The Best Ways To Prevent Over-Trading 

It means having a cut-off point in which all open orders are automatically canceled after a certain period has elapsed without them being traded. I should do this once you have successfully identified the trend that will see you into profit.

Once again, it’s important to state here that this is only likely to work for those trading CFDs on margin since you can trade them so quickly and easily. It doesn’t apply if you are trading stocks or other instruments which take some time before they act in a way that makes them suitable for trading via the CFD market.

2. Risk Management Strategies 

It is to set your email software not to receive notifications while the open order remains. It means that your email settings won’t respond until after the order has been closed out with a loss or gained in full.

It’s also advisable to include an element of CFD market risk management here by setting up an automated stop-loss on your open positions. They are available for most platforms and will close out your trade at a pre-agreed price when activated. It means you won’t have the chance to over-trade since you will already be in profit or loss.

The trick is going back to your initial focus. But, first, it’s important to highlight that not all traders are likely to over-trade. For example, some who only trade with tiny amounts mightn’t even be able to do it accidentally. 

On the other hand, those with large accounts would be more likely to develop an unhealthy trading habit which could lead them into trouble if they didn’t have protection in place.

3. A Money Management Plan 

They are almost always designed with risk management uppermost in the list of priorities. If you are trading CFDs on margin, it’s essential to create a plan which places your capital at its lowest risk possible under different CFD market conditions.

It is just one aspect of making sure you don’t over-trade. You can also take steps to minimize this possibility by creating rules for yourself – e.g., only entering trades when the rating reaches three or above out of 5, closing out any transaction if the rating drops below 1, etc. 

The more rules you place upon yourself, the less chance there will be that you break them and end up over-trading. It is best done by having strict rules in place regarding when you open and close trades, plus how much of your capital should remain ‘at at risk’ at any time.

Conclusion:

With these points in mind, you should be able to keep your capital safe and avoid over-trading while still profiting from the vast majority of trades performed.

Finally, remember that we do not do all trading on margin, so many techniques won’t apply here – setting up stop-losses, for example, other than at the time of entering the trade, would prevent it from being traded at all. We cannot buy this means that any shares or commodities CFD market trading this way using CFDs.

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Mashum Mollah

Mashum Mollah is an entrepreneur, founder and CEO at Viacon, a digital marketing agency that drive visibility, engagement, and proven results. He blogs at MashumMollah.com.

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