When a trader enters the world of CFD trading, his first priority is to make money. However, his main priority is, through trade, to feel personal satisfaction in order to improve his psychology. Regardless of whether he gains or loses money in trading, what matters is for him to feel good, maintaining his psychological balance. Psychology in trading is of utmost importance and plays a key role in the trader's consistency in staying in the CFD market.
In trading CFDs in some cases, the trader makes significant gains, especially when exposed to high risk due to unusually large trades, possibly using margin and leverage. In this case, the trader leads to an unexpected profit, usually with the ally of luck. Luck is important for achieving a profitable result from trading, but the same does not apply when it comes to improving psychological balance. Improving psychological balance requires much more. It mainly requires knowledge about a very critical size, which is: how much is the exposure at risk every time a trader takes a position in the CFD market.
An experienced trader, over time, realizes that his approach to trading CFDs must be based on focusing first on risk. Because risk calculation is what will help him not only to achieve a possible favourable result but above all to achieve good psychology.
If the trader trades without being able or willing to calculate the risk he takes, then it is only a matter of time before the huge losses overshadow any of his profits. The inability to calculate the risk creates conditions of endless uncertainty and therefore it becomes difficult to achieve a good psychological balance for the trader.
In order for a trader to focus on risk, the first necessary step is to accept that the outcome of each transaction is always unknown. With this as a compass, experienced traders always determine the amount they are willing to lose when entering a trade, so that not fall prey to the risk of ruin.
In fact, determining the amount they are willing to lose will lead them to determine the stop-loss orders and determine the appropriate size of CFDs to hold in each trading position. In this way, experienced traders achieve risk reduction thus ensuring their retention in the CFD market, while at the same time achieving mental balance.
In times of continuous losing trades, risk reduction by determining the size of trades on CFDs becomes even more critical. During these periods, experienced traders check how many consecutive losses may occur and what are the statistical probabilities of remaining in the trade based on the size of the trades.
This knowledge enables them to resist the temptation to either give up in frustration or try to take an excessive position to immediately gain what they have lost.
Only by setting risk limits that lead to the right size of trades in CFDs can traders reap the benefits of their future trades. This attitude requires time and experience to develop. But it also requires the right tools to be provided to traders. The experience and the tools will give the right confidence to the traders creating a balance in their psychology in order to keep them in the CFD market.
Traders, like everyone else when they are in risky situations need a good balance in psychology. Balancing in psychology is the cornerstone of successful trading. Nothing is more valuable than the balanced psychology, that is only achieved when CFD traders take risks that are able to determine their exposure to them, thus defining the appropriate CFD trading size.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The Article/Information available on this website is for informational purposes only, you should not construe any such information or other material as investment advice or any other research recommendation. Nothing contained on this Article/ Information in this website constitutes a solicitation, recommendation, endorsement, or offer by LegacyFX and A.N. ALLNEW INVESTMENTS LIMITED in Cyprus or any affiliate Company, XE PRIME VENTURES LTD in Cayman Islands, AN All New Investments BY LLC in Belarus and AN All New Investments (VA) Ltd in Vanuatu to buy or sell any securities or other financial instruments in this or in in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. LegacyFX and A.N. ALLNEW INVESTMENTS LIMITED in Cyprus or any affiliate Company, XE PRIME VENTURES LTD in Cayman Islands, AN All New Investments BY LLC in Belarus and AN All New Investments (VA) Ltd in Vanuatu are not liable for any possible claim for damages arising from any decision you make based on information or other Content made available to you through the website, but investors themselves assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other Article/ Information on the website before making any decisions based on such information or other Article.