How to Increase the Number of Profitable Trades While Trading CFDs

Irrespective of the instrument, trading in financial markets is associated with a high level of risk. Trading in CFDs is no exception. A trader’s skill lies in increasing the number of profitable trades and restricting losing trades. Besides skill, it involves discipline and patience.

CFDs refer to contracts for difference, a system of trading in financial instruments without actually owning them. A buyer and seller enter into an agreement to settle on the basis of difference between the opening and closing prices. Like any other financial instrument, it is imperative that traders in CFDs employ the same strategic tools for managing risks associated with the markets.

Regardless of the profit potential in CFDs, you need to have a system based on stop loss and trailing stop loss orders to restrict losses. Markets have a mind of their own and no matter how experienced a trader may be, there is no way one can predict market movements and be correct all the time.

A stop loss order is a pre-defined level at which you must exit the trade. Once the price reaches that stop loss price, the broker’s trading platform automatically triggers closure of the trade. If the markets are moving favourable to your position, you need to place a trailing stop loss. It is basically about increasing (or decreasing if you are in a short position) the stop loss price. This prevents profitable trades in CFDs to turn into losing trades. It is a method of locking the profit and remaining in the trade as long as the market keeps moving favourably.

While trading CFDs it is essential that a stop loss is placed in every trade if you want to increase the number of profitable trades and limit losing ones.