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Journey to CFD

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"SD4_6439" by Web Summit is licensed under CC BY 2.0 
It's been a while since I wrote something in this blog. Workload and personal life demanded lots of time lately. During this holiday break, there seems to be something that made me write again.

Last 2016, I decided to try something new as a sort of investment CFD (Contract for Difference). The difference between where a trade is entered and exited is the contract for difference (CFD). A CFD is a tradable instrument that mirrors the movements of the asset underlying it. It allows for profits or losses to be realized when the underlying asset moves in relation to the position taken, but the actual underlying asset is never owned. Essentially, it is a contract between the client and the broker.

My initial strategy is to put 50% of my portfolio into copying trades of others and 50% trading on my own. During my first month, I made several successful trades when I concentrated in trading gold. This time I was able to discover the term "leverage". Leverage in CFD means a multiplier to the rise and fall of a particular asset. Let's say you bought gold 1100$ with X5 leverage. The value of gold went up to 1155$ or 5% up. Instead of you getting 5%, you will have a 25% increase of the value bought. Of course it will definitely hurt if the value of gold fell by 5%. While you can earn from rise of a particular asset, you can also get profits from selling or shorting. Using the same example if you sell gold and it fell by 5% at X5 leverage, you will get an equivalent of 25% profit of your position.

I enjoyed leverage too much, I burned much of my initial profits. High leverage means high risk and high risk will swallow your funds to zero if you don't know how to control yourself. All the profits I got from weeks of trading gone in 2 days. I learned to control my self and leave own trading for while and let my copy trades handle the trading for me. Luckily, I have good copy trades and was able to double my portfolio within 6 months. Along the way, I also learned to use lower leverage even no leverage at all and smaller positions that track the ups and downs of the asset I am trading. This month is my 12th month in CFD and so far, I was able to triple the initial funds for CFD with some additional funds during deep reds. I am trading forex, commodities, indices. I also discovered trading cryptocurrencies, but I think this subject deserves a whole separate article. For my second year trading CFDs, I will include Emerging market ETFs, European and US stocks. Wish me luck please!


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