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Trading CFD's, what I'm I missing here?
I'm looking at trading CFD's as I like the fact you can go "short" as well as "long" and as long as you use stop losses you can limit any loss. So why do most of the people who trade CFD's tell newcomers, on this site, not to do it? I understand that you can lose a lot of money quickly if you don't know what you are doing, but surely putting a stop loss in place can save you to a certain degree.
I think I'm pretty good at looking at a chart and can see if the chart is going up or down....after all the price is a reflection of peoples attitude to that stock and doesn't necessarily reflect the true value of the company, I don't think I need to know about company fundamentals. So I intend to go long on stock that's trending upward and go short on stock that's tending downward. Even if I were to get it wrong 50% of the time (which I don't think I will), by putting a stop loss in at a sensible point, surely I would make more than I lose. So what I'm I missing here, what are the hidden traps?
1 Answer
- Anonymous1 decade agoFavourite answer
There's no 'hidden' traps. Trading CFDs is no different to trading stocks. That is, in both, you have to get the price movement correct. A chart, basically gives you a visual history of the share price. It is not an indication of the future price. For a stop loss to be 100% effective it has to be a guaranteed stop loss (which may not be available on a CFD.
I think you are just being over optimistic. A bad trait. If you get it wrong half the time and right the other half that's not going to make you money.
Source(s): http://www.shareworld.co.uk/