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Disclaimer

The contents of this blog do not constitute investment advice. Trading CFDs and Forex can be very risky and you can lose much more than your initial deposit. Seek professional advice before making any trades.

My first trading mistakes

I first opened a CFD trading account about three months ago. In that time I’ve already made quite a few mistakes but hopefully I’ve learnt from them. Here are some of them.

Not checking the spread before entering a trade

If for example the index is moving in a range of say 10-20 points and you want to do a short term bet then opening a trade with a spread of 10 is going to make it almost impossible for you to come out with a profit.

Similarly if the index is trending then a large spread will still make it much harder for you to make a profit – any profit will be smaller because of the spread and any loss will be magnified.

Lesson: Make sure the spread is appropriate for the type of trade you are going into before you enter.

Forgetting about pending orders

Having pending orders which you have forgotten about can be very expensive as trades can then be opened without you even being aware of it. You could get lucky and it could go your way but more likely you’ll lose.

Lesson: If your platform supports it have the pending order blotter on screen at all times. Check for any pending orders before you leave your screen and before you close the trading platform down.

Not fully understanding your trading platform

I’ve had one situation that worried me. I somehow got into a trade that I wasn’t expecting (see forgetting about pending orders above), and I couldn’t work out how to close it down. It was a Forex trade and as the trading ticket wasn’t on screen I couldn’t work out whether I needed to buy or sell! It took me a few minutes to figure it out. No major loss was made and it could have been a lot worse.

Lesson: Read the manual before you start!

Not setting the default trading sizes correctly

For a particular stock the default trade size was 10,000. I wanted to trade much smaller so I set the market buy/sell size to 100. However I forgot to change the default trade size for the stop order as well. I entered the trade by selling 100 shares. I set a stop – which I didn’t properly check! The stop was hit and it bought 10,000 shares! Ooops!

Closed it quickly and of course it turned a small profit into a much larger loss.

Lesson: Make sure that you exit a trade and set your stops correctly! Especially if you will be away from your trading screen for any length of time. And check your stops when you have created them to make sure they are correct.


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