CFD Trading Experience: Is it a scam or not?

This is a question many traders ask themselves. In this article I would like to share my personal experience with you. I have been familiar with contracts for difference for over 9 years and have used them in various trading strategies. What is the risk and is it worth trading CFDs? - Learn from my experiences in the following article.

Caution: CFDs can be very risky

CFDs are one of the riskiest forms of investment in the financial markets. Every investment carries a risk, but due to the leverage effect, I consider contracts for difference to be even more risky. Many beginners or even advanced traders have burnt their capital with this financial product.

It is not without reason that most brokers have a warning "Over 70% of CFD accounts lose money". The leverage can be as high as 1:30 for the private trader under European regulation. Brokers outside the EU even offer higher leverage of up to 1:2000. Professional traders always get a high leverage. Because there are so many traders who underestimate the risk, leverage was limited for private traders in 2018. 

Leverage must be used intelligently. Many beginners simply underestimate the risk and open too large positions. Leverage allows you to open positions with larger capital. Be sure to pay attention to the risk. The trading platforms all offer a stop-loss that limits the loss.

Wrong risk management means high losses

From my experience, the biggest mistake in CFD trading in Exness mt4 download is risk management. There is no point blaming the leverage or the financial product.

Tip: Without risk management, you can suffer high losses very quickly. CFD trading is risky and the bet should be well considered!

Risk management means that the trader uses his capital in a targeted manner. No arbitrary positions should be opened. The risk should be determined and calculated beforehand. The stop loss limits the risk and automatically closes your position at the desired price or loss.

So if you trade an account with 5,000€ balance and use a risk management of 1-2% of the total capital, the risk per trade should not be higher than 50-100€. This is not the size of the position but the amount you will lose if the position goes against you and the position is stopped out.

Beginners tend to risk 10% or more of the total capital. This is a fatal mistake and means a quick end to trading. In addition, emotions come into play with such high sums. Always keep the risk the same and you will have fewer problems. Keep this point in mind and you will be ahead of most traders.