How to create a successful CFD trading plan
It is actually surprising how many CFD traders that start trading without a clear path or plan to how they will achieve successful trading. This is surprising because almost all of make some sort of plan when venturing in to anything else that could have substantial financial importance such as working at a job or starting a company. To have a well-defined and easily understood CFD trading plan is absolutely paramount to achieving success with CFD trading so therefore I have listed particle advice on how to create on below.
You must have a trading plan that aligns with your discipline to follow it
Before we go in to the sections that your trading plan should include it is well worth pointing out that there is no point having a trading plan that you do not have the discipline, time and effort to follow. My advice is to be as realistic as possible when creating the trading plan; if you only have time to trade a couple of hours every week, don’t include large quantities of trades a goals, if you only have knowledge about a specific commodity like oil for example, don’t state on your plan to trade with all commodities. Having a realistic CFD trading plan and strategy is key to its success.
Now that we got that out of the way, let’s focus on what your CFD trading plan should include.
Your trading method
This is the foundation of your trading plan. This might include the type of research you do before a trade, how you evaluate the risk level of a trade, your exist strategy and how you monitor a trade while is ongoing. It is of course difficult to formulate all this without having some experience of trading so while making your trading plan, I would recommend opening a demo account to find tune all of this to test what works for you without risking any of your capital. I recommend the demo account at IQ Option that I used 5 years ago to start secure my trading method.
Your trading positions
You need to clearly define which scenarios and conditions needs to be in place for you to venture in to a trade. These might be technical such as percentage increase in the price of a CFD over the last week or more event-based such as news happening or expert analysis recommendations. Whatever your scenarios might be, the main point here is to have then clearly defined any never deviate from them no matter what appealing opportunities comes your way.
Your risk levels
You always need to have a clear strategy relating to the risk you take with CFD trades and these needs to be applied to every trade you make. There are many different ways to state and calculate these but I tend to want to use the capital vs. trade rule which says that at any given time I can only afford to lose 15-20% of my entire capital inside why CFD trading account. I therefore set my stop loss orders accordingly and can sleep well at night knowing that even though I have a losing trade, I can still afford it in the long run. Another good CFD strategy is to include a volatility-based stop, say if the market suddenly moves very quickly a stop to the trade will be issued.
Your trading diary
Your trading plan should also contain the way you will keep a separate trading diary. This is important because it gives you a way to keep track, evaluate and come back to both successful and unsuccessful trades in the future. The best way of thinking of a trading diary is like a cash register in a scope; it records the transactions and money coming in to the show, when they happened, what sold (think CFD instruments here), the closing profit of the day and how much cash was taken out of the register every evening at closing. You can use a traditional notepad for this but I tend to want to use Excel as it gives me the flexibility to perform calculations on the trades that I enter into the journal.
We hope that this article on trading plans has given you the information you need. The next natural step is to use the free educational material and free demo account that our recommended CFD broker provides: