Many novice traders blame CFDs for their losses and even may say “CFDs suck”. Losing money can trigger an emotional response and novice traders may blame someone else for losing money. But it is not Contracts for Difference (CFDs) that are responsible for the losses, it ultimately comes back to the trader. It is essential to take responsibility for your trading and decide when how and what you are going to trade.

Understand the Power of Leverage

Contracts for Difference (CFDs) are a leveraged product and leverage means that money can be made or lost very rapidly. The fact that a trader lost money using Contracts for Difference (CFDs) does not mean that CFDs suck. If you do not yet have the discipline to use stops on every trade and to manage your risk, then maybe you are not ready to trade CFDs.

CFD Brokers Deliberately Hit Your Stops

Some of the reasons traders give that CFDs suck, centre on the CFD Broker knowing where your stop losses sit and therefore deliberately target these stops. The trade then reverses rapidly and goes in the favoured direction. The trader makes a loss, even though they were correct. In reality the CFD brokers have better things to do than chase stop losses and I personally have had trades hit my stop loss and reverse as well as trades move to within one point of my stop loss before reversing. The answer is careful stop placement, making an allowance for the normal fluctuations of the underlying instrument. A CFD broker cannot push the market around, it is the sum total of all the traders that move the market. Sometines this will hit your stop no matter how carefully you place the stop.

Ripped Off By Requotes

Many new traders trading shares also reckon that CFDs suck because their market maker broker re-quotes them a higher entry price when buying the share. These re-quotes are delivered because there is insufficient volume at the level that the trader wishes to trade, or the market has moved rapidly from the current price. This is known as slippage and is accepted as normal when buying shares. Some of the shares are executed at the cheaper price, and some at a higher price providing an average price higher than where the order was placed. A market maker can only execute the whole order or none of it, partial fills are not possible, so a re-quote is provided at a price level that allows them to execute the whole order. Re-quotes are not about ripping traders off, but just reflect the underlying execution of the order.

Take Responsibility for Your Trades

It is wrong to blame CFDs as the cause of bad performance, it is always the trader. Just as blaming the market is futile, saying CFDs suck does not address the underlying cause of the problem. A trader must take responsibility for his or her results and with this belief system in place it is possible for the trader to change their outcomes. “If you think the rest of the world is driving you crazy, you will have to send the rest of the world to a psychiatrist for you to get better.”

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