There’s no definitive yes or no answer to this question. However, there’s no saying that money can’t be made from trading CFDs. And if you’re fortunate enough to make a good sum of it, well, then I guess one could say you can make a living from CFD trading. But, as with any other income earning activity, whether you can live off this money is largely dependent on your lifestyle, budget, needs and wants.
So, what is CFD trading and how does one make money from it?
Well, CFD refers to Contract for Difference. As the name would imply, it’s a contractual agreement between a broker and a trader. The agreement allows a trader to speculate on the price movements of the CFD’s underlying asset. The asset itself varies from agreement to agreement but could include forex, stocks, indices, metals, commodities, indices, ETFs, and many others. Access to those underlying assets largely depends on your brokers particular offering. Speculating on the price movement successfully earns the trader a profit. The trader usually attempts to do this off multiple price movements of many assets as a way of generating significant gains. In the event of wanting to use CFD trading as a means of making a living, a significant amount of time requires to be dedicated to it.
How does one go about learning how to become a CFD trader?
The path to becoming a CFD trader is relatively straightforward. But, ultimately, like any new challenge, learning is an incredibly crucial part of the journey. Trading CFDs is anything but simple. It’s notoriously volatile and incurs high risk. In fact, without wanting to dampen your enthusiasm, it’s been reported that almost 80% of all CFD traders lose all of their money. So this makes gaining a proper understanding of what you’re about to embark on even more vital. Especially if you intend on making a living trading CFDs. But how does this learning take place? Well, in a variety of different ways. In fact, we’ve covered this topic in quite a bit of detail in this blog here. However, to sum it up, let’s explore some of the key trading related educational resources that traders use to expand their knowledge:
1. One of the most popular forms of learning today has to be videos.
YouTube is probably one of the most widely used platforms for accessing free videos by CFD trading experts. However, while easy to access and free to use, do your homework to ensure you’re learning from reputable traders. They should come highly recommended or be peer-recommended professionals.
2. Another hugely utilised resource for learning are podcasts.
Who doesn’t like having the flexibility of learning on the go? Podcasts typically offer insights, market analysis, tips and strategies from industry professionals. Notably, CFD brokers can be a great source for consuming podcasts. T4Trade has compiled a great selection of trading related podcasts for your listening. They cover a range of topics and are suitable for traders at all levels of expertise.
3.Trading related e-books and blogs are great learning tools for those who enjoy reading.
With them, CFD traders have the opportunity to acquire crucial insights into trading fundamentals, technical and fundamental analysis, strategies, and so much more. In fact, T4Trade has a dedicated blog page that covers scores of CFD trading related topics. It also offers a range of e-books compiled by the broker’s award-winning research team.
4. Keeping on top of global events and news releases is an essential part of the learning process.
These factors have the potential to have a huge impact on asset prices that may lead to poor trade performance and significant losses. This makes utilising/monitoring an Economic Calendar so useful for informed financial decision making. T4Trade’s Economic Calendar delivers economic news events and indicators at your fingertips. CFD traders can use this calendar to identify trading opportunities and plan their trades accordingly.
Choosing a CFD broker that aligns with your objectives
In your attempts to make a living trading CFDs, ensure you pick a broker that wants to help you succeed. Selecting a broker that best aligns with what you’re trying to achieve is key to making this happen. However, not all brokers are created equal unfortunately. So, make sure you consider the following points in your attempts to choose the broker that’s best for you.
Is the broker regulated?
Make sure the broker you’re thinking to register with is regulated by a reputable financial authority. This ensures that they are obligated to adhere to strict rules and regulations. A regulated broker is also one that operates with transparency and ethical principles. Using a regulated broker also reduces the risk of fraudulent activities or loss of client funds. Remember, you’re looking to earn a living trading CFDs. The last thing you want to do is not safeguard your money as best you can.
Does the CFD broker give you access to multiple financial markets?
In the context of wanting to earn a viable income, having a variety of trading opportunities to maximise potential profitability is key. This means you want a broker that will give you access to a range of trading markets like CFDs on stocks, indices, metals, etc. This also offers a way to diversify your trading portfolio, thereby spreading potential risk in the event the market moves in an adverse direction.
What type of trading platform does the CFD broker offer?
It’s crucial that you are given access to a trading platform that is user-friendly and that caters to your quintessential needs. One of the most widely used platforms by global traders to date is the MetaTrader 4 (MT4) which provides almost all the tools one needs to be strategic. MT4 is renowned for its technical analysis and algorithmic trading, making it a sought after tool to earn a living off trading.
Are there a variety of trading accounts to choose from?
Establish whether the broker offers multiple trading accounts for you to choose from. Determine whether they have accounts that best suit your level of expertise, budget and expertise. Remember, as you become more experienced, you can start experimenting with other accounts.
How competitive is the CFD broker?
As we’ve already mentioned, brokers are a dime a dozen. Picking one that will suit you best is a process that must consider factors like spread, leverage, speed of order execution, ease of withdrawing and/or depositing funds, etc. You want a broker who can provide competitive spreads, flexible leverage, fast trade executions and quick withdrawal or deposit of funds. Remember, trading is a game of skill as much as it is speed. You want a broker that can help you achieve both.
Does the CFD broker offer educational resources?
Another important factor in picking a CFD broker is whether they offer resources to make you a better trader. Learning should never stop, it’s an ongoing endeavour to keep your skills honed. Additionally, let’s not forget that trends change and technologies advance, nothing about trading is static. So you want a broker that can help you not only keep up but stay ahead. So, ensure your broker offers a range of learning tools to help you increase the likelihood of CFD trading success. In this way, you’ll also increase your chances of making a living trading CFDs.
What level of customer support can you expect?
You certainly want a broker who works to offering a level of customer support that is to the highest standards. So test them out. Reach out via email or Live Chat. Ask questions and measure their response in terms of speed and knowledge. Brokers can provide you with the information you need? Able to respond in a language you understand? Are they friendly? These are all factors that will shape your trading experience so choose a broker that makes you feel welcome. One that is willing to assist in a manner that approachable.
So, we go back to the question of whether you can make a living trading CFDs. Perhaps, provided you have an effective trading plan in place, a willingness to learn and keep on learning, and a broker that wants to see you succeed. There is no guarantee of 100% success in trading, it simply doesn’t exist and anyone promising it does is lying.
So, approach CFD trading carefully, educate yourself, use a demo trading account to practice trade execution, and then move to a live trading environment equipped with confidence, skills, and knowledge. Don’t exceed your budget and be careful with your use of leverage, if you decide to use it. Ensure you adopt effective risk management techniques to safeguard your money and above all, remain focused. Good luck!
Disclaimer: This material is for general informational and educational purposes only and should not be considered investment advice or an investment recommendation. T4Trade is not responsible for any data provided by third parties referenced or hyperlinked in this communication.
