CFD Trading/Share Trading : Stop Loss in Perspective

As you all may have heard in the news, Wall Street got belted last evening. New York plunged due to the fear of investors of further credit crisis. The Dow fell by about 362 points or 2.7%, one of the biggest falls of the year.

In turbulent times such as now, being in a possession of a good trading plan is a must.

In this post, I’d like to take an opportunity to put stop loss into perspective.

This week, I had two open positions on shares CFDs. One was in the red (loss), and another one was in a profit position. This morning, I had exited on both positions. The first one was because my stop loss had been triggered and the second one, I exited voluntarily.

Let’s talk about the first one.

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Expensive Trading Courses

I’m going to share with you on what I think about paid trading courses. I haven’t been to one but I’ve read and heard quite a bit of these courses.

There’s a variety of courses out there offering all sorts of things. Some may be relevant to you and some may not be relevant.

First thing you need to know is whether they are teaching you on how to become a trader (i.e. teach you about the market and help you develop your own trading system) or are you paying to for their trading system. If the course is offering the latter, I think your money is worth spent someplace else. Why? Think about this. If the trading system is so good, why would the person sell it to somebody else? Why not keep the “holy grail” themselves and use it to make truckloads of dough? Remember, trading is hard. Persistance and hardwork is key. Taking shortcuts and being spoon-fed are recipes for disaster.

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Beginning your Investment/Trading Knowledge Journey

Stepping into a new territory can be daunting for most people, including myself. This is especially true when I first started my investment/trading journey. The big question of “Where do I start?” comes to mind. I’ll share with you on how I actually started.

Well, where do we start? The first thing you need to do is to know yourself. You need to ask yourself a few questions like:

1. What is your risk tolerance level? Are you a low-risk, medium-risk, or a high-risk investor/trader.

2. What are you interested in? To trade or to invest?

3. What is your time-frame? Are you investing/trading for the long-term or do you need your money back in the next couple of months.

4. Do you have a full-time job or other commitments? If yes, how much time can you commit to your investment/trading venture?

5. What sort of products do you want to be involved with? Properties, shares, derivatives, bonds, mutual funds?

Knowing yourself is imperative to know where to begin learning about investing/trading.

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Investing & Trading. What’s the difference?

People, including myself, get quite frustrated when they get bombarded with different financial terms and theories. In fact, the frustration is enough to deter some people from the investment world altogether. In this post, I’ll try to explain the difference between two key terms of the investment world. They are, investing and trading.

These two might be dealing with the same financial products but they are actually very different. Different meaning and different techniques employed. Let’s talk in the context of shares/stocks where you’ll have share investors and share traders.

Share investors generally buy shares in order to keep them for the long-term. Usually, investors plan to keep the shares that they own for the long-term of 12 months or more. They do this for the capital growth and for the dividend payments. In other words, they employ the buy and hold strategy. The most famous share investor that I can think of is Warren Buffett.

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CFD Trading/Share Trading : Setting Stop Loss

This is a continuation of my previous entry on CFD Trading. Please take note that CFD trading is similar with share trading. So, posts about CFD Trading is relevant for share traders as well. In the entry, I said trading plan is paramount to survive in CFD Trading. A good trading plan always has a strategy on how to set stop loss(es).

First of all, what is a Stop Loss. Stop Loss is a sell order that you place below the price that you buy the CFD/Share for(for long positions) so that if the price falls to that level, you’re automatically out of the market. Before I go in any further, let me warn you that you should not get into a CFD/Share position without first figuring out where your stop loss should be. In other words, no stop loss, no trade!

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CFD Trading : An Introduction

Being in Australia for 3 years, I came across a lot of new things when it comes to wealth-creating strategies. One of it is CFD Trading. What is CFD Trading you ask? Well, to begin with, CFD trading is similar to share trading. Very very similar indeed.

CFD stands for Contract for Difference. The definition, as stated in Wikipedia.com, is a contract between two parties, buyer and seller, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time. (If the difference is negative, then the buyer pays instead to the seller.)

CFD was invented in the UK in 1990’s and was introduced in Australia in the year 2002.

To trade CFDs (plural for CFD), you need to have an account with a CFD provider. You will then be able to trade CFDs on a wide range of securities such as Shares, Forex, Futures, Commodities, Bonds, and etc. Let me give you an example:

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