After trading the CFD market for a few months, novice traders develop a unique problem. They tend to close their trades too early as they think it will help them to secure profit. But if a trade is closed too early, the risk-reward ratio is altered to a great extent. And it can be fatal mistakes for the novice’s trades. To trade the market efficiently, a trader must learn to deal with their active trades in a strategic way. Unless they manage their trades strategically, it will become nearly impossible for novice traders to change their life.
To fix the common problems associated with your trade management techniques, you have to take some smart steps. In this article, we will give you some amazing guidelines that will allow you to fix the most basic problems in the investment business.
Developing the routine
The first thing which you need to focus on is developing your trading routine. If you fail to develop your trading routine in a structured way, you are never going to become a professional trader. Most novice traders think they know everything about this market and they don’t have to follow a proper trading routine. But if you act like this, you will never know what it takes to become a professional trader. Write down the rules by which you will be taking the trades. The rules should not be too rigid because if you trade with rigid rules, you will lose money most of the time.
Risk to reward ratio
The traders often close their trades too early as they set unrealistic goals. If the risk to reward ratio is bigger than 1:6, you should check the trading parameters again. Make sure you are not placing the take-profit level by ignoring the support and resistance level. On the contrary, if the risk to reward ratio is less than 1:2, you are never going to protect your capital. That’s why professional traders at Saxo always take the trades with an optimized risk to reward ratio. But do not think that by taking the trades with a high risk to reward ratio, you can avoid the big losing trades. Losing trades are nothing but a part of this trading profession.
The direction of the trend
People fail to book profit from their active trades since they don’t trade with the trend. Trading with the trend is by far the most efficient way to make a profit in the investment industry. If you ignore the direction of the existing trend, you are going to lose money in most cases. Take your time and learn to evaluate your risk profile in a very strategic way. Find the direction of the trend by using the simple trend line tool. After that, you may use the Fibonacci retracement tools to execute the trades at the best possible price. You may ride the trend till you spot any major reversal signals in the market.
Learn about the chart pattern
Studying the major chart pattern in the CFD market gives you a unique advantage to make a profit. The rookie traders often think they know every bit of detail about this market. Thus they avoid the basics of the chart pattern and lose money. Study the major chart patterns from the scratch and use them to manage your trades in a much more efficient way. But do not start trading with the reversal chart pattern. If you trade the reversal chart pattern, you will be losing money most of the time. Learn to trade with the existing trend as it will make things easier.
Managing the trades will become easier once you start to follow the above-mentioned tips. But at times you will still face a series of losing trades. To avoid such problematic issues, you may take a small break and refresh your mind. Never get addicted to this market because if you do so, you are going to lose money most of the time.